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Brief Update- NZD rampant and AUD follows behind.

Written by Sam Coxhead on May 27th, 2011.      0 comments

2:00 PM (NZT) The New Zealand dollar has continued to be in hot demand overnight, making ground on all its major trading partners. The strong trend started in the offshore session last Friday and has continued almost unabated this week.
There has been all kinds of speculation about where the buying interest has come from. Last Friday night was one large US bank buying, and it was against selling a mixture of different currencies. Since then there has been apparently re-insurance flows which are impossible to pick the timing of.
Then came the news of the high Fonterra payout, which was widely expected.
The RBNZ Inflation Expectations survey provided a boost as it was higher than many thought it would be, since that release the interest rate curve has moved to increase the chances of a 25pt hike in December meeting from the RBNZ to almost 80%, up from just over 50%.
Finally, yesterday the market seems to have been an article about Chinese buying of NZ Govt bonds. This is not new news, the Chinese have been buying for months as the increased Govt bond tender program has been rolled out.
With such momentum resistance levels have been brushed aside against a number of different currencies and this has forced the exit of sold NZD positions, further adding to the buying pressure.
Just how long this momentum will last is hard to tell. The strange price action of this entire week points towards a high level of uncertainty. Commodities weaker, equities up and interest rates lower in the US, all is all it a really mixed outlook. The Greek debt issue seems to have become a political football and the amount of noise coming in the form of headlines is mind numbing.
The appetite for NZD and to a lesser extent AUD remains strong into the Asian session with the market continuing to gather momentum as can be seen by the table below.
    Last 24 hours trade
  Current level Low High
NZD/USD 0.8157 0.8044 0.8157
AUD/USD 1.0665 1.0568 1.0665
NZD/AUD 0.7654 0.7599 0.7654
AUD/NZD 1.3065 1.3065 1.3160
NZD/GBP 0.4970 0.4931 0.4971
NZD/EUR 0.5756 0.5688 0.5756
NZD/JPY 66.24 65.55 66.39
NZD/CAD 0.7982 0.7838 0.7985