The New Zealand dollar retreated from the 22-year high during early trading in the Wellington session, but later recouped its gains to take aim on 0.7950, above Tuesday?s close of 0.7920.
Headlines:
- CMA Accuses Government Of Causing Decline In Export Sector
Protests against the persistently elevated exchange rate of the New Zealand dollar have gained momentum as further monetary policy tightening seems imminent at the July 26 meeting of the RBNZ. The Canterbury Manufacturer?s Association criticized the New Zealand government for resorting to monetary measures as an easy way out of more-potent structural policy reforms.
Source: Stuff.co.nz
http://www.stuff.co.nz/4132195a13.html
- Strong Kiwi Dollar Erodes Earnings from Kiwifruit Exports
The latest victims of the ‘unsustainably high value? of the Kiwi dollar are New Zealand?s exporters of kiwifruit. A report by Zespri International, exporter of one-fourth of the world?s commercially tradable kiwifruit, indicated an estimated 20 percent decline in earnings despite strong sales.
Source: Bloomberg
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adZd4jFhsHaI
- J P Morgan Changes Forecast As Expectations of OCR Hike Increase
Given the economic outlook presented by top-tier fundamentals released until this week, J P Morgan has changed its forecast on the likelihood of an interest rate increase at the July 26 Reserve Bank meeting. Since the release of a previous report on June 29th, J P Morgan has increased the probability of further OCR tightening by the RBNZ from 30 percent to 65 percent.
Source: Scoop - New Zealand News
http://www.scoop.co.nz/stories/BU0707/S00318.htm
Market Activity:
Currency Market - NZD:
The New Zealand dollar retreated from the 22-year high during early trading in the Wellington session, but later recouped its gains to take aim on 0.7950, above Tuesday?s close of 0.7920. The pace of the currency market may have been set after news that Bear Stearns?s hedge funds were wiped off value caused across-the-board weakness in the US dollar. The Kiwi dollar did decline against a number of crosses - in particular the pair with its trans-Tasman counterpart, the Australian dollar, slid from Tuesday?s close of AUD 0.9069 to AUD 0.9030.
The trade weighted index, a measure of New Zealand?s currency against the currencies of the country?s five key trading partners, failed to sustain the record level of 76.08 and declined to 75.77 at 8 am in Wellington.
NZDUSD (Daily Chart)
Source: Bloomberg
Equity Market - NZSX-50 Index:
At the open of Wednesday?s session in Wellington, New Zealand?s stock exchange mimicked the upbeat tone demonstrated Tuesday by its US counterparts when the Dow Jones Industrial Average broke the 14,000 level for the first time. However, trading activity lost steam during the session, and the benchmark NZSX-50 index closed at 4255.64, down 3.2 points, a setback compared to the 18 points gain at Tuesday?s close. Turnover was light at NZ$ 103.2 million, and gains outnumbered losses 55 to 43.
While bulls are expected to retain control of the global equity markets, the performance of the benchmark NZSX-50 Index is likely to be curtailed by further credit tightening by the RBNZ.
[I]NZSX-50 (Daily Chart)
Source: Bloomberg[/I]
Fixed-Income Market - 10-year Government Bonds:
Yields on New Zealand?s government debt have been climbing upwards, further reiterating market sentiment that interest rates are headed higher, as the Reserve Bank of New Zealand steadfastly attempts to curb the housing market. The yield on the benchmark 10-year government bonds has increased for five consecutive sessions to 6.863 percent.
[I]10-year Government Bonds (Daily Chart)
Source: Bloomberg[/I]