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Re-insurance flows the only obvious answer to mystifying commodity currency strength

Written by Sam Coxhead on March 30th, 2011.      0 comments

11:47 AM (NZT) The commodity currencies remained in demand in the offshore session, with the NZD slightly outperforming the AUD as the AUD ran into resistance against the USD at 1.0300. The YEN saw selling across the board as the further implications of their series of disasters becomes known.  There are signs of USD strength emerging and these are being driven by the series of Fed members being rolled out to communicate that the end to the Quantitative Easing process is near ,and that rates will have to rise as some stage soon to ensure that inflationary pressures do not quickly build. The short term rates in the US have risen quite sharply of late and these rising yields will eventually spill over into the FX market in the form of a stronger USD.
In terms of the levels of NZD and AUD on all cross rates, I am finding the current price action hard to understand. The Fed signaling the end of QE and possibly cash rate hikes sooner than the market had been anticipating and the NZD and AUD are relentlessly bid, this does not make sense. The only logical answer can be reinsurance flows to cover both the NZ and Australian natural disasters. Expect some sort of logic to re-enter the market over the next week. In the meantime take advantage of great value buying of EUR,GBP and USD!
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7560 0.7495 0.7583
AUD/USD 1.0286 1.0205 1.0299
NZD/AUD 0.7350 0.7318 0.7367
AUD/NZD 1.3605 1.3574 1.3665
NZD/GBP 0.4722 0.4686 0.4739
NZD/EUR 0.5358 0.5320 0.5376
NZD/JPY 62.28 61.14 62.51
NZD/CAD 0.7368 0.7323 0.7389