The Kiwi dollar suffered a setback as investor risk-aversion, prompted by lingering concerns over the full repercussions of the US subprime lending crisis, led to a brief unwinding of carry trade positions.
Although the New Zealand dollar is the winner among currencies in terms of its annual performance so far this year, the rally could be nearing its end.
[B]Headlines:[/B]
- [B]Housing Sector Days-To-Sell Gauge Steady at 30, But Sale Prices Drop[/B]
A report by the Real Estate Institute of New Zealand Inc. indicated that the days-to-sell measure for June house sales printed steady at May?s median level of 30 days in June, but declined from 37 days in June of the prior year. The average house sale price declined to NZ$347,500 from May?s record-high of NZ$350,000. Data on New Zealand?s housing sector is under scrutiny due to RBNZ?s objective to curb the housing boom as a means to stem inflationary pressure on the economy.
Bloomberg - Are you a robot? - [B]May?s Retail Sales Expected to Rise 0.5 Percent[/B]
In advance of data on May?s retail sales, due to hit the wires Thursday 22:45 GMT, a Bloomberg survey estimates a 0.5 percent increase in retail sales, a recovery from the 1.2 percent decline in April. Despite three interest hikes in thirteen weeks, consumer spending remains bolstered by labor shortage that continues to stoke wage growth.
Bloomberg - Are you a robot? - [B]Consumer Confidence In Economy Declines For Next 6 Months[/B]
Although citizens of New Zealand expressed more optimism about annual economic conditions as compared to the same period last year, sentiment about the outlook for the remaining half of the year sunk. The six-monthly survey by MasterCard Worldwide indicated that the MasterIndex? of consumer confidence for the next six months dropped to 57.1 versus a statistic of 61.0 for the previous half of the year.
Kiwis Worried about New Zealand’s Economy | Scoop News
[B]Market Activity:[/B]
[B]Currency Market - NZD:
[/B]The Kiwi dollar suffered a setback as investor risk-aversion, prompted by lingering concerns over the full repercussions of the US subprime lending crisis, led to a brief unwinding of carry trade positions. Although the New Zealand dollar is the winner among currencies in terms of its annual performance so far this year, the rally may be nearing its end. The Kiwi dollar declined against most majors, but the most significant depreciation was the slide to a two-week low by the NZDJPY pair, a favorite of investors seeking to capitalize on the yield differential. The New Zealand dollar dropped to a one-week low of 0.7715 against the US dollar, a substantial decline from the intraday high of 0.7790 at the beginning of Wednesday?s session in Wellington.
The Kiwi dollar?s future trend may be affected by the recent spate of fundamentals, suggesting that the need for further interest rate hikes by the RBNZ has been diminished.
[I]NZDUSD (Daily Chart)
Source: Bloomberg[/I]
[B]Equity Market - NZSX-50:[/B]
New Zealand?s bourse followed the downward spiral in global equities set in motion yesterday after credit rating agencies Moody?s and S&P announced their decision to downgrade ratings on debt backed by US subprime mortgages. The benchmark NZSX-50 index declined 7.16 points, or 0.16 percent, to 4229.68. Turnover amounted to NZD 136 million, and losses outweighed gains 67 to 34 on 141 stocks traded. Gains were led by South Port, up 10 cents or 4 percent to NZD 260 after the issue of exploration permits for boosted expectations of greater port traffic.
[I]NZSX-50 Index (Daily Chart)
Source: Bloomberg[/I]
[B]Fixed-Income Market - 10-year Government Bonds:[/B]
Yields fell to 6.735 percent from Tuesday?s 6.777 percent after investor behavior exhibited a bout of risk aversion following the decision by Moody?s and S&P to downgrade the credit ratings of loans backed by subprime mortgage lending. Yields face substantial event risk this week, as strong retail sales on Thursday could lead traders to move towards pricing in another RBNZ hike on July 26th.
[I]10-year Government Bonds (Daily Chart)
Bloomberg[/I]