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Reducing US debt ceiling fears sees "risk on" and the NZD soars

Written by Sam Coxhead on July 20th, 2011.      0 comments

9:15 AM (NZT) The US moves closer towards Congressional agreement on the raising of the Federal debt ceiling and the equity markets resond positively. US housing numbers and positive US corporate earnings results helped fuel the enthusiasm for risk.

The NZ dollar has been the star performer, setting new post float highs against the US dollar and Pound Sterling. The NZD's performance has been underpinned by moves in the interest rate markets to increase the chances of an earlier than expected hike from the Reserve Bank of NZ (RBNZ). Currently pricing a 50% chance of a 25pt hike in September,  and moving closer towards 50pts of hikes by the december meeting.

Next week's RBNZ cash rate review and short statement will give us a better idea of their attitude to removing the emergency 50pts of cuts after the first earthquake in Christchurch. It looks like we will continue to see the NZD in demand ahead of this statement.

The Bank of Canada left their cash rate unchanged at 1% , but their language was more "hawkish" than at the previous meeting. They also acknowledged the systemic risks from the European debt crisis and stated that the effects would be felt globally should the situation escalate.

    Last 24 hours trade
  Current level Low High
NZD/USD 0.8557 0.8436 0.8573
AUD/USD 1.0732 1.0604 1.0741
NZD/AUD 0.7976 0.7935 0.8005
AUD/NZD 1.2538 1.2492 1.2602
NZD/GBP 0.5306 0.5252 0.5311
NZD/EUR 0.6045 0.5976 0.6056
NZD/YEN 67.73 66.70 67.84
NZD/CAD 0.8130 0.8091 0.8154