Roger J Kerr says positive and negative sentiments are equally balanced for the Kiwi currency

By Roger J Kerr

Yet again the NZ dollar has succumbed to selling pressure at rates above 0.6700 and has returned to 0.6625.

Over the last eight months a major resistance level has been established between 0.6700 and 0.6800 and each time the Kiwi has been pushed higher it has not been able to sustain the gains and attract any follow through buying interest.

On the technical charts both the 50-day and 200-day moving averages for the NZD/USD exchange rate have converged just above 0.6700 and this has added to market perceptions of the impenetrable cap.

Equally, on the bottom side of the Kiwi dollar’s well established 0.6400 to 0.6800 trading range, the support level 0.6400 has held firm with market speculators not prepared to sell the Kiwi dollar below this level as they clearly do not see it as a profitable trade. Market sentiment therefore has proven to be evenly balanced between the positive and negatives for the NZ dollar and therefore there is nothing to suggest that the rate will move out of the existing 0.6400/0.6800 band over coming months.

The negative variables that consistently hold the Kiwi dollar below the 0.6700/0.6800 barrier continue to be a stronger US dollar on global forex markets and the lower dairy commodity prices.

As anticipated, the USD sell-off in January to $1.1300 against the Euro could not be sustained and the greenback has returned to $1.0900.

Expectations of further monetary loosening by the ECB and improvement in more recent US economic data have caused the turnaround in the EUR/USD direction.

Global equity markets have also stabilised and settled over recent weeks after the ructions in January resulting in the earlier safe haven capital flows into Euro and Yen reversing over this last week.

Similar to last August, the financial and investment markets knee-jerked to seemingly weaker Chinese economic data causing major sell-offs of stocks.

However, confidence does soon return and the markets settle down when it becomes apparent that the transformation of the Chinese economy from infrastructure/capital investment to a consumer spending economy does not pose a massive threat to the overall global economy.

The US dollar should continue to improve against the Euro to the $1.0500 area over coming weeks and this will naturally pull the Kiwi lower to 0.6500/0.6400.

The US Federal Reserve may not necessarily lift their official interest rates another 0.25% in March, however the US economic data remains sufficiently robust to justify at least two further 0.25% increases in their short-term interest rates this year. Three weeks ago the US moneymarkets had priced-out any increases by the Federal Reserve, which was an overly pessimistic position on the US economy and market volatility.

It is very instructive for the medium term direction of the NZD/USD exchange rate that the FX markets have not sold the Kiwi down on the two large price decreases for wholemilk powder (WMP) at the last two Global Dairy Trade auctions. The current WMP futures prices for April and May point to an improvement in the WMP price at this Tuesday night’s auction, potentially an increase of around 5%. Given the close historical correlation between the NZD/USD rate and WMP prices, the current WMP level of US$1,890/MT suggests a 0.6400 NZD/USD exchange rate. A recovery back above US$2,000/MT in WMP leaves the NZD/USD rate fairly valued at the 0.6500/0.6600 area.

The longer term economic fundamentals of the New Zealand economy continue to strengthen. GDP growth has returned to annualised rates above 3.00% after the dip in confidence/activity levels in mid-2015. Outside of the challenges with prices in the dairy industry, the rest of the economy is buoyant and certainly boosted by the lower interest rate and exchange rate environment. The economy certainly does not need any additional monetary stimulation by the RBNZ in 2016.

The benefits of being in an enlarged regional trading block like the TPPA are clear to see for the NZ economy. The 10% crash of the UK Pound from $1.5500 to $1.3800 against the USD over recent weeks is seen as a swift and vicious verdict by the global FX markets that an economy like the UK is better off inside the tent of Europe than outside the tent. Economically speaking the UK’s exit from Europe makes no sense at all, however the June referendum result may well reflect the general public’s dissatisfaction with more emotional immigration and social benefit issues. 

The RBNZ will have a tricky job to communicate the right tone in their upcoming 10 March monetary policy statement. They will not want to project a more bullish outlook on the economy as that would only send the NZ dollar higher and make it harder to get annual inflation into the 1% to 3% target band again. Therefore, they will need to maintain their “easing bias”, which is increasingly hard to justify when the latest ANZ Regional Trends survey to 31 December 2015 points to GDP growth well above 3.00%.

The NZ dollar is not going to depreciate too much when the economy is outperforming most others and our dominant commodity (WMP) is more likely to increase in price over the remainder of this year.

To subscribe to our daily Currency Rate Sheet email, enter your email address here.

Email:  

 
 
 
 
 
 
 
 

Daily exchange rates

<!–

var root_url = "http://www.interest.co.nz/charts-csv/";
var tabs_count="7";
var csvfiles_loc= ["/charts-csv/chart_data/exchangerates/daily-usd.csv"," /charts-csv/chart_data/exchangerates/daily-aud.csv"," /charts-csv/chart_data/exchangerates/daily-twi.csv"," /charts-csv/chart_data/exchangerates/daily-yen.csv"," /charts-csv/chart_data/exchangerates/daily-yuan.csv"," /charts-csv/chart_data/exchangerates/daily-eur.csv"," /charts-csv/chart_data/exchangerates/daily-gbp.csv"];
var chart_title_arr= ["US dollar","Australian dollar","Trade weighted index","Japanese Yen","Chinese Yuan","Euro","British pound"];
var chart_subtitles_arr= ["Daily benchmark rate","Daily benchmark rate","Daily benchmark rate","Daily benchmark rate","Daily benchmark rate","Daily benchmark rate","Daily benchmark rate"];
var tab_titles_arr= ["US$","AU$","TWI","u00a5en","u00a5uan","u20acuro","GBP"];
var source_arr= ["RBNZ","RBNZ","RBNZ","RBNZ","RBNZ","RBNZ","RBNZ"];
var source_hyperlink_arr= ["8"];
var tabswidth="8";
var decimal_arr= ["4","4","4","2","2","4","4"];

// variable declaration
var xpad;
var padding_value=0;
var range_selector=0
var loc;
var updt;
var val_num;
var vi=0;
var max_val;
var x;

var finalAr = new Array();
for (var i = 0; i <= tabs_count; i++) {
finalAr[i] = new Array();
}
var flagAr = new Array();
for (var i = 0; i <= tabs_count; i++) {
flagAr[i] =[];
}
var yaxisAr = new Array();
for (var i = 0; i 536)
{
var b = arr.length – 536; // to get last 36 points
}
else if (arr.length < 536)
{
var b = 537 – arr.length;
}
else if(arr.length == 536)
{
var b=2;
}

// to generate the format for date representation in x axis

var timestamweek = 604800000;
var timestamday = 86400000;
var timestammonth30 = 2592000000;
var timestammonth31 = 2678400000;
var timestamyear = 31536000000;
var timestamquarterly = 7776000000;

for (var u=0;u<2;u++) {
arr[u] = parseLineCSV(arr[u]);
fomat= String(arr[u][0]);
var k=0;

do {
k++;
} while(fomat.charAt(k)!="-")
var k1 =k;

do {
k++;
} while(fomat.charAt(k)!="-")
var k2=k;

do {
k++;
} while(k<fomat.length)
var k3=k;

var dd= fomat.substring(0,k1);
var mm = fomat.substring(k1+1,k2);
var yy = "20"+fomat.substring(k2+1,k3+1);
var yy1=fomat.substring(k2+1,k3+1);

// conversion of months into numerical form

//+++++++++++++++++++++++++++++++++++
if (mm == "Jan")
{
mm= "01";
}
else if (mm == "Feb")
{
mm= "02";
}

else if (mm == "Mar")
{
mm= "03";
}

else if (mm == "Apr")
{
mm= "04";
}

else if (mm == "May")
{
mm= "05";
}

else if (mm == "Jun")
{
mm= "06";
}

else if (mm == "Jul")
{
mm= "07";
}

else if (mm == " Aug")
{
mm= "08";
}

else if (mm == "Sep")
{
mm= "09";
}

else if (mm == "Oct")
{
mm= "10";
}

else if (mm == "Nov")
{
mm= "11";
}

else if (mm == "Dec")
{
mm= "12";
}

// +++++++++++++++++++++++++++++++++++++++++++++++++++++++

var date2 = mm+"/"+dd+"/"+yy;

if (u==0)
{
var timestam1 = Date.parse(date2);
}
else if(u==1)
{
var timestam2 = Date.parse(date2);
}
}
var timestamvar = (timestam2- timestam1);
var flagAR_count=0;
for (var i=2;i<arr.length;i++) {
flagAR_count++;
var tempAr = new Array();
var tempAr1 = new Array();
arr[i] = parseLineCSV(arr[i]);
if (arr[i]!='')
{

fomat= String(arr[i][0]);
replic=String(arr[i][0]);
var k=0;

do {
k++;
} while(fomat.charAt(k)!="-")
var k1 =k;

do {
k++;
} while(fomat.charAt(k)!="-")
var k2=k;

do {
k++;
} while(k<fomat.length)
var k3=k;

var dd= fomat.substring(0,k1);
var mm = fomat.substring(k1+1,k2);
var current_year=""+new Date().getFullYear();
var c_year=Number(current_year.substring(2,4));
var c_data=Number(''+fomat.substring(k2+1,k3+1));
if(c_data c_year)
{
var yy = “19”+fomat.substring(k2+1,k3+1);
}
else if(c_data == c_year)
{
var yy = “20”+fomat.substring(k2+1,k3+1);
}
// conversion of months into numerical form

//+++++++++++++++++++++++++++++++++++
if (mm == “Jan”)
{
mm= “01”;
}
else if (mm == “Feb”)
{
mm= “02”;
}

else if (mm == “Mar”)
{
mm= “03”;
}

else if (mm == “Apr”)
{
mm= “04”;
}

else if (mm == “May”)
{
mm= “05”;
}

else if (mm == “Jun”)
{
mm= “06”;
}

else if (mm == “Jul”)
{
mm= “07”;
}

else if (mm == “Aug”)
{
mm= “08”;
}

else if (mm == “Sep”)
{
mm= “09”;
}

else if (mm == “Oct”)
{
mm= “10”;
}

else if (mm == “Nov”)
{
mm= “11”;
}

else if (mm == “Dec”)
{
mm= “12”;
}
// +++++++++++++++++++++++++++++++++++++++++++++++++++++++

var date = mm+”/”+dd+”/”+yy;

var timestam_1 = Date.parse(date);
var timestam= timestam_1+86400000; //86400000 added to get correct timezone output from Date.parse
var time4 = new Date(timestam);
var Weeko = time4.getDay();
var dd2 = time4.getDate();
var mm2 = time4.getMonth();
var flag_y=arr[i][1];
var ahref_title=”Click here for full story”;
if(arr[i][2]) {
var url=arr[i][2];
var flag_date='{“x”:’+timestam+’, “title”:”  “,”text”:”Click here for Story!”}’;

flagAr[csvgen_counter].push(flag_date);
}
var yy2 = time4.getFullYear();
var yy3 = yy2+””;
var yy4= yy3.substring(2,4);
//++++++++++++++++++++++++this for days conversion++++++++++++++++++++++++++++
if (Weeko==1)
{
Weeko = “Mon”;
}

else if (Weeko==2)
{
Weeko = “Tue”;
}

else if (Weeko==3)
{
Weeko = “Wed”;
}

else if (Weeko==4)
{
Weeko = “Thu”;
}

else if (Weeko==5)
{
Weeko = “Fri”;
}

else if (Weeko==6)
{
Weeko = “Sat”;
}

else if (Weeko==0)
{
Weeko = “Sun”;
}

//+++++++++++++++++++++++this is for month conversion+++++

if (mm2==0)
{
mm2 = “Jan”;
}

else if (mm2==1)
{
mm2 = “Feb”;
}

else if (mm2==2)
{
mm2 = “Mar”;
}

else if (mm2==3)
{
mm2 = “Apr”;
}

else if (mm2==4)
{
mm2 = “May”;
}

else if (mm2==5)
{
mm2 = “Jun”;
}

else if (mm2==6)
{
mm2 = “Jul”;
}

else if (mm2==7)
{
mm2 = “Aug”;
}

else if (mm2==8)
{
mm2 = “Sep”;
}

else if (mm2==9)
{
mm2 = “Oct”;
}

else if (mm2==10)
{
mm2 = “Nov”;
}

else if (mm2==11)
{
mm2 = “Dec”;
}
//++++++++++++++++++++++++++++++++++++++++

//weekly
if ( timestamvar == timestamweek)
{
fomat2=dd2+”-“+mm2+”-“+yy4;
padding_value=timestamweek;
range_selector=2;
}

// Daily
else if ( timestamvar = timestamyear)
{
fomat2=mm2+”-“+yy4;
padding_value=timestamyear;
range_selector=3;
}

//monthly
else if ((timestamvar <= timestammonth30)&&(timestamvar = timestamquarterly)
{
fomat2=mm2+”-“+yy4;
padding_value=timestamquarterly;
range_selector=3;
}

else
{
fomat2=dd2+”-“+mm2+”-“+yy4;
padding_value=timestamday;
range_selector=3;
}

arr[i][0]= fomat2;
var decpad;
decpad = parseFloat(arr[i][1]);
arr[i][1] = decpad;

if(i==(arr.length-1))
{

// Functionality to get the last value

var xvalu=dd2+”-“+mm2+”-“+yy4;
var yvalu= String(arr[i][1]);
var xyvalu=”Latest value at “+xvalu+” is “+yvalu;
updt=”Updated on “+xvalu;
}

tempAr.push(timestam);
if(!arr[i][1])
{
arr[i][1]=null;
}
yaxisAr[csvgen_counter].push(arr[i][1]);
// tempAr1.push(timestam);
// tempAr2.push(tempAr1);
tempAr.push(arr[i][1]);
last_val=timestam;
finalAr[csvgen_counter].push(tempAr);
}
xpad=last_val+padding_value; //*****************to end up graph early//////
if(arr[i]== “”)
{
vi=arr.length-i;
arr.length=arr.length-vi;
i=arr.length-1;
fomat = replic;

var k=0;

do {
k++;
} while(fomat.charAt(k)!=”-“)
var k1 =k;

do {
k++;
} while(fomat.charAt(k)!=”-“)
var k2=k;

do {
k++;
} while(k<fomat.length)
var k3=k;

var dd= fomat.substring(0,k1);
var mm = fomat.substring(k1+1,k2);
var yy = "20"+fomat.substring(k2+1,k3+1);

// conversion of months into numerical form

//+++++++++++++++++++++++++++++++++++
if (mm == "Jan")
{
mm= "01";
}
else if (mm == "Feb")
{
mm= "02";
}

else if (mm == "Mar")
{
mm= "03";
}

else if (mm == "Apr")
{
mm= "04";
}

else if (mm == "May")
{
mm= "05";
}

else if (mm == "Jun")
{
mm= "06";
}

else if (mm == "Jul")
{
mm= "07";
}

else if (mm == "Aug")
{
mm= "08";
}

else if (mm == "Sep")
{
mm= "09";
}

else if (mm == "Oct")
{
mm= "10";
}

else if (mm == "Nov")
{
mm= "11";
}

else if (mm == "Dec")
{
mm= "12";
}
// +++++++++++++++++++++++++++++++++++++++++++++++++++++++

var date = mm+"/"+dd+"/"+yy;
//here flagAr may be
var timestam = Date.parse(date);
var time4 = new Date(timestam);
var Weeko = time4.getDay();
var dd2 = time4.getDate();
var mm2 = time4.getMonth();

var yy2 = time4.getFullYear();
var yy3 = yy2+"";
var yy4= yy3.substring(2,4);
//++++++++++++++++++++++++this for days conversion++++++++++++++++++++++++++++
if (Weeko==1)
{
Weeko = "Mon";
}

else if (Weeko==2)
{
Weeko = "Tue";
}

else if (Weeko==3)
{
Weeko = "Wed";
}

else if (Weeko==4)
{
Weeko = "Thu";
}

else if (Weeko==5)
{
Weeko = "Fri";
}

else if (Weeko==6)
{
Weeko = "Sat";
}

else if (Weeko==0)
{
Weeko = "Sun";
}

//+++++++++++++++++++++++this is for month conversion+++++

if (mm2==0)
{
mm2 = "Jan";
}

else if (mm2==1)
{
mm2 = "Feb";
}

else if (mm2==2)
{
mm2 = "Mar";
}

else if (mm2==3)
{
mm2 = "Apr";
}

else if (mm2==4)
{
mm2 = "May";
}

else if (mm2==5)
{
mm2 = "Jun";
}

else if (mm2==6)
{
mm2 = "Jul";
}

else if (mm2==7)
{
mm2 = "Aug";
}

else if (mm2==8)
{
mm2 = "Sep";
}

else if (mm2==9)
{
mm2 = "Oct";
}

else if (mm2==10)
{
mm2 = "Nov";
}

else if (mm2==11)
{
mm2 = "Dec";
}
//++++++++++++++++++++++++++++++++++++++++

//weekly
if ( timestamvar == timestamweek)
{
fomat2=dd2+"-"+mm2+"-"+yy4;
}

// Daily
else if ( timestamvar = timestamyear)
{
fomat2=mm2+”-“+yy4;
}

//monthly
else if ((timestamvar <= timestammonth30)&&(timestamvar = timestamquarterly)
{
fomat2=mm2+”-“+yy4;
}

arr[i][0]= fomat2;
var decpad;

decpad = parseFloat(arr[i][1]);
//arr[i][1] = roundVal(decpad);
arr[i][1] = decpad;
if(i==(arr.length-1))
{

var xvalu=dd2+”-“+mm2+”-“+yy4;
var yvalu= String(arr[i][1]);
var xyvalu=”Latest value at “+xvalu+” is “+yvalu;
updt=”Updated on “+xvalu;
}
}

}
}

//other required functions

//chart configuration starts here

function getXMLHttpRequest(file) {

//var arrSignatures = [“MSXML2.XMLHTTP.5.0”, “MSXML2.XMLHTTP.4.0″,
//”MSXML2.XMLHTTP.3.0”, “MSXML2.XMLHTTP”,
//”Microsoft.XMLHTTP”];

//for (var i=0; i < arrSignatures.length; i++) {

try
{
var xmlhttp = new window.XMLHttpRequest();
xmlhttp.open("POST",file,false);
return xmlhttp;
}
catch(e)
{
error=e.message;
}

//}
throw new Error("MSXML is not installed on your system.");
}

function readCSV(locfile) {
// load a whole csv file, and then split it line by line
var req = new getXMLHttpRequest(locfile);
//req.open("POST",locfile,false);
req.send("");
return req.responseText.split(/n/g);
}

function parseLineCSV(lineCSV) {
// parse csv line by line into array
var CSV = new Array();

lineCSV = lineCSV.replace(/,/g," ,");

lineCSV = lineCSV.split(/,/g);

// This is continuing of 'split' issue in IE
// remove all trailing space in each field
for (var i=0;i<lineCSV.length;i++) {
lineCSV[i] = lineCSV[i].replace(/s*$/g,"");
}

lineCSV[lineCSV.length-1]=lineCSV[lineCSV.length-1].replace(/^s*|s*$/g,"");
var fstart = -1;

for (var i=0;i=0) {
for (var j=fstart+1;j<=i;j++) {
lineCSV[fstart]=lineCSV[fstart]+","+lineCSV[j];
lineCSV[j]="-DELETED-";

}
fstart=-1;
}
}
fstart = (lineCSV[i].match(/^"/)) ? i : fstart;
}

var j=0;

for (var i=0;i<lineCSV.length;i++) {
if (lineCSV[i]!="-DELETED-") {
CSV[j] = lineCSV[i];
j++;
}

}

return CSV;
}

function roundVal(val_num){
var dec = 2;
var result = Math.round(val_num*Math.pow(10,dec))/Math.pow(10,dec);
return result;
}

function setdecimalpoints(deca)
{
var deca1= deca;
var deca2= parseInt(deca);
if((deca1-deca2)!=0)
{
return 2;
}
else
{
return 0;
}
}
for(i=0;i

Charts loading…
Charts loading…
Charts loading…
Charts loading…
Charts loading…
Charts loading…
Charts loading…

 

Roger J Kerr is a partner at PwC. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com