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USD bounces back into fashion

Written by Sam Coxhead on January 21st, 2011.      0 comments

7:55 AM (NZT) Offshore markets were pretty wild overnight. The NZD and AUD under considerable pressure from the USD, GBP and EUR. 
 
There are a couple of different payers to the weakness. USD strength came to hand as Bond yields in the US moved higher. This was added to by comment from Japanese officials about the level of Japans Govt debt, which is enormous. The market has been very sold USD this week, especially against the YEN, so this caused some unwinding of these positions.
 
The EUR surprisingly outperformed the GBP, as a big flow was seen to see GBP and buy EUR, this is rumoured to be associated with the funding of Irelands debt bailout package.
 
Chinese data yesterday pointed towards continuing growth in China. The issue is that with inflation already a major concern in China, these healthy growth numbers have pushed the market to speculate on further monetary policy moves from the Chinese to slow growth, and therefore inflationary pressure . Slower growth in China means less demand for commodities , so the commodity and equity markets got sold aggressively. The obvious move in tandem with this is to sell the likes of the NZD and AUD, being the growth/commodity currencies.
 
The NZD has been sold more than the AUD. I can only speculate that offshore investors in the NZD were betting on a higher than expected CPI number in NZ yesterday, and the added weakness can be attributed to those speculative players exiting positions.
 
Retails Sales numbers out this morning in NZ have the market expecting +1.3%.
 
    Last 24 hours trade
  Current level Low High
NZD/USD 0.7561 0.7533 0.7688
AUD/USD 0.9861 0.9833 1.0010
NZD/AUD 0.7669 0.7664 0.7689
AUD/NZD 1.3039 1.2998 1.3053
NZD/GBP 0.4761 0.4753 0.4799
NZD/EUR 0.5621 0.5618 0.5703
NZD/JPY 62.81 62.54 63.05
NZD/CAD 0.7555 0.7553 0.7654
 

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