brussels_sprout

Let us see , eh ?
The worm has turned !!! Check on this prediction in 6 months, maybe ?

cypherpunk

Holy F'ing S. http://www.nzherald.co.nz/section/3/...ectid=10444876
Reserve Bank steps in to force down NZ dollar

Bollard just painted a big "kick me" target on our beloved dollar's backside. Some currency traders just lost a bundle and you can bet they're hacked off. Maybe I'm being simplistic but as far as I can see all they have to do is buy up a shirtload more NZDs and drive up the value, then bet on Bollard intervening again. Rinse and repeat until $7 billion is spent.

justinthyme

Hopefully it caught one or two speculators by surprise

However I doubt the NZ central bank has the funds to turn the market on its own (though it may get help from the BoE and the Fed maybe?).

Bollard didn't seem to handle the situation too well last week by the way:

"However, the rate hike itself was not most market-moving aspect of the announcement. What truly stoked the kiwi was Bollard’s unflappable hawkishness. Charged with keeping inflation between 1 and 3 percent, the central bank governor kept the door wide open for further tightening when he said consumer spending and housing demand are fanning inflation to uncomfortably high levels. Interestingly, immediately after lifting the overnight lending rate and opening the flood gates to even more foreign capital, Bollard theorized that the exchange rate is at levels that are “both exceptionally high and unjustified on the basis of New Zealand’s medium-term fundamentals.” Whether this was a weak attempt to talk the currency down or if the central banker is genuinely confused is unclear."

Kippers

Well, so much for the free market that NZ followed so slavishly.

After 20 odd years of deregulation the economy is coming apart at the seams. And wages still 1/3 lower than comparable countries.

All that pain suffered by Kiwis to prove Milton Friedman/Maggie Thatcher/Roger Douglas' theories.
And now the Government and the Reserve Bank have capituled and are waving the white flag.
Back interfering in the markets again.

So much for the experiment.........RIP



Kip

cypherpunk

Well I wouldn't go that far, it's not like they've fixed the exchange rate or anything. I just got round to watching Close-up and I agree with Gareth Morgan, this reeks of political interference. With my conspiracy theory hat on I would think they are trying to stop more severe anti-housing-inflation methods being recommended by the select committee on monetary policy, because they would be hugely unpopular before the election.

justinthyme

Kiwis up for sale

Financial Times June 12 2007


Some central bankers might rather enjoy being mobbed by Japanese housewives. But Alan Bollard, governor of the Reserve Bank of New Zealand, may live to regret getting in the way of Japan's currency day-traders. Whether the RBNZ makes money on yesterday's currency intervention or not, it is a hard policy to justify in a small, open economy such as New Zealand's.
The central bank's sales of kiwi dollars drove the currency down by about 2 per cent against the yen and the US dollar. The RBNZ is trying to do something about the unwanted strength of the kiwi, which hit a 22-year high against the greenback earlier this month, a level that causes suffering for New Zealand's non-farm exporters.


The trouble is that the RBNZ has also had to set interest rates of 8 per cent to tackle an inflation problem. That is 16 times the level of rates in Japan, so it is tempting for all and sundry - international hedge funds as much as Japanese day-traders - to sell yen and buy kiwis.

New Zealanders should be sceptical about their central bank making the opposite bet. To start with, it is unlikely to make any meaningful medium-term difference to the exchange rate. Japanese households have about $13,000bn in financial assets; New Zealand has a few billion US dollars set aside for intervention. It is like using a nut to crack a sledgehammer.

Nor can the RBNZ simply issue a lot more kiwi dollars in order to buy more yen. It is, remember, trying to slow the economy to prevent inflation and a large boost to the money supply would not help.
There is only one argument the RBNZ can use to justify its intervention: that it intends to make a profit by beating the hedge funds at their own game. If the market responds to intervention then this kind of stabilising speculation works rather well. The central bank can sell when the currency is strong, buy when it is weak and does not even have to pay bonuses to its civil servant currency traders.
But the RBNZ does not have the funds to control the market: it is just another speculator. It might do well - the Bundesbank used to make a mark or two on currencies - or it might follow Malaysia's Bank Negara, which lost a fortune betting on sterling in 1992. Win or lose, this is not the job of a central bank. If New Zealand's citizens want to sell their currency they are well able to do so for their own accounts.
Big economies - such as Japan's - have the muscle to manage their currencies, though it is usually better not to. Small economies such as New Zealand's just have to go where the markets take them

Paladin

More uninformed short term focused hogwash as usual; the gold bull market is intact until such time as ~$500 or ~£250 is broken: see charts here:

http://www.gold.org/value/stats/stat...since1971.html

And since you like to think the price of gold is only making money for people in US$ terms because the US $ is weakening against other major currencies, best read this:

http://www.gold-eagle.com/editorials...sis061107.html

Try using your monopoly money when hyperinflation has set in! HA! You can burn it in your wood burner to heat your living room I guess, oh no that won't ever happen will it!! Best read this :

http://www.usagold.com/germannightmare.html

or this:

http://www.gold-eagle.com/editorials...son051806.html


I wonder what the Germans were saying just before all THAT happened?!!! Couldn't happen again though could it? Best ask the Argentinians! HA!

Don't believe the US$ and all other fiat paper currencies are losing purchasing power cos the central banks/banks are inflating the money supply at over 12% pa? Best go plug some dates in here then:

http://minneapolisfed.org/research/data/us/calc/

Well that lot should give you something to whinge about for a while!

Kippers

Welcome back Dave.
I knew you couldn't stay away

Kip

Paladin

Its a fleeting visit! I just renewed my annual membership so thought I might as well get my money's worth LOL! Besides the GBPUSD is doing nada this morning - waiting on the US CPI data(for what that load of manipulated tosh is worth LOL!) at 1.30pm, so had naff all else to do!



Dave

Kippers

That's a shame.
We do enjoy your jolly little quips

What's going with the GBPUSD then?

I'm just watching the oil prices go sky high again.
They reckon $80/barrel this year.
That should help the US economy......not!


Oil output has stalled,
http://www.businessweek.com/magazine...n_id=rss_magzn


Kip

Paladin

You're just trying to encourage me aren't you!!!

Yeah $100/barrel more like and on up from there!!

The Yanks are buggered either way: they are in a recession but most of the public-head-in-the-sand idiots there have no clue! Their only hope is lower interest rates to save the housing market as its 70%+ of the US economy but that aint gonna happen any time soon, as Bernanke is stuffed! He knows what inflation REALLY is(ie not the CPI crap that is released!) AND he knows the money supply growth is REALLY over 12%pa, so he knows he's backed into a corner - higher rates are in the offing - just look at the T-bond market recently!!! yields are breaking out to the upside!! On top of that in the end he will choose to try and save the US$ over saving the Housing market so he can keep the whole monopoly money system going for a while longer! That means higher rates coming soon!

Paladin

GBPUSD is still in long term uptrend, curently in a correction phase as friends of the US are buying Dollars to save its butt as it neared the dreaded 80 level on the USDX again! The USDX is still in a LOOOOONG down trend though as we all know! Soon to be no more than toilet paper in the coming years LOL!

Kippers

Well, that should help hold down the Kiwi then. Yes?


You coming over in July?
I thought it was Sept.

Kip

Paladin

Its not going to have a huge effect on the NZDUSD rate while the interest rate differential is so large but the closer they get, then yes the Kiwi should weaken, but its the same old story; interest rates aren't the only factor!

Yep, we're heading to NZ in July, brought all our plans forward 3 months! Can't wait to get there now!

Dave

cypherpunk

New Zealand dollar 29% overvalued says Morgan Stanley:
http://www.economist.com/finance/dis...ory_id=9366051

With a high range of 45% overvalued! Well, I can dream, and now my dreams will be of $3.80 to the pound.