It seems that fading intervention is the market?s best bet as the initiatives taken by the Reserve Bank of New Zealand has done little to stem the currency?s rise. In fact the New Zealand dollar is now trading back near pre-intervention levels.
The central bank is certainly not going to be happy about this, which raises the possibility of further intervention. However, be forewarned as the RBNZ?s intervention war chest remains very small. The Australian dollar is higher as well, which indicates that the market?s demand for the high yield currencies is robust. The Canadian dollar on the hand sold off significantly. Retail sales increased a paltry 0.4 percent in the month of April. Excluding automobiles, sales were flat that month. This puts an end to the strong trend of consumer spending that we have seen over the past few months as well as the downtrend in USD/CAD, at least for the time being. Even though high energy prices, poor weather, and an early Easter are all to blame, the bottom line is that we are beginning to see serious holes or weakness in the Canadian economic growth story.