The Kiwi dollar, down 14 percent over the past three weeks, snapped its decline above a significant support at 0.6638 USD as cautious optimism led to a retreat by New Zealand?s currency.
Headlines
Expansion in Monthly Electronic Card Transactions Drops to 7.8% in July
In July 2007, there were 79 million electronic card transactions totalling $4.6 billion, Statistics New Zealand said today. When adjusted for seasonal fluctuations, this represents a 0.1 percent decrease in the value of total card spending compared with June 2007.
http://www.scoop.co.nz/stories/BU0708/S00385.htm
Source: Scoop.co.nz
Cullen Comments that Kiwi is Near Top of Normal Trading Range
New Zealand Finance Minister Michael Cullen said New Zealand’s dollar, which has slumped 14 percent the past three weeks, is near the top of its normal trading range. “The New Zealand dollar is still right now at the upper end of its normal range over the economic cycle at around 70 U.S. cents,” Cullen said in the parliament in Wellington today.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aT.AkLcl8NvM
Source: Bloomberg
Dairy Farmers Expected to Receive Windfall Bonus from Drop in Kiwi Dollar
Fonterra is expected to boost its forecast of its milk payments at the end of this week following the plunge in the New Zealand dollar, providing yet another fillip to dairy farmers’ incomes. But as currency volatility and credit-market worries continue to plague financial markets, economists vary wildly in their predictions of just how far the payout will rise above the latest forecast of $5.53 a kilogram of milk solids.
Source: The New Zealand Herald
Market Activity
Currency Market - NZD:
The Kiwi dollar, down 14 percent over the past three weeks, snapped its decline above a significant support at 0.6638 USD as cautious optimism led to a retreat by New Zealand?s currency. The NZDUSD pair made an upward move during the Wellington session, closing at 0.6955 USD versus Monday?s close of 0.6913 USD. Finance Minister Michael Cullen commented that despite the nosedive by the Kiwi dollar, the NZDUSD pair was trading " at the upper end of its normal range over the economic cycle at around 70 U.S. cents". The trade-weighted index rose to 67.57 from 67.15. Despite the signs of recovery by the New Zealand dollar, the implied volatility for the currency currently exceeds the five-year average of 11.2 percent.
[B]NZDUSD (Daily Chart)
[/B]Prepared by DailyFX Research Team
Source: Bloomberg
Equity Market - NZSX-50 Index:
New Zealand?s stock market rallied for a second consecutive session, with the benchmark NZSX-50 index up about 1 percent, a modest rise compared to the 2.3 percent gain made by close of Monday?s trading session. The NZSX-50 index closed up 45.41 points at 4027.79 on moderate turnover worth NZD143.7 million. Rises outnumbered falls 65 to 48. Telecom shares declined on news of the resignation of chief financial officer Marko Bogoievski, but later rebounded from Friday?s 10-month low, to close up 2.9 percent or 12 cents at NZD 428.
[B]NZSX-50 Index (Daily Chart)
[/B]Prepared by DailyFX Research Team
Source: Bloomberg
Fixed-Income - 10-year Government Bond Yields:
Despite signs of pickup in global equity markets, demand for government debt continues strong as risk aversion sways the balance in favor of comparatively less risky investment alternatives. Although the NZSX-50 index and the Kiwi dollar staged a comeback at the beginning of a new week of trading, bearish pressure persists on benchmark 10-year bond yields, down 8 basis points to 6.180 percent. To further ease the looming liquidity crunch, New Zealand?s Debt Management Office announced the addition of NZD $100 million to Thursday’s government bond tender. DMO treasurer Philip Combes announced “Global market events have led to a build-up of demand for government securities over a very short period of time. In response, the additional bonds will be offered in order to help satisfy that demand”.
[B]10-year Government Bond Yields (Daily Chart)
[/B]Prepared by DailyFX Research Team
Source: Bloomberg