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22 Feb 2013
Forex: NZD/USD recovery subject to RBNZ, Fed
The recent fall in the New Zealand Dollar vs the Greenback has had two main drivers behind. Firstly, the perception that the RBNZ may be shifting its focus toward a more interventionist role to avoid the appreciation of the currency. Secondly, the FOMC minutes induced-rally, which saw the US Dollar gain across the board on Wednesday.
While it is often said that following other's advise when trading may not be the best idea, as overtime can cause more harm than good on one's discipline to stick to his/her own plan, it is interesting to note, from a fundamental perspective, how there is significant consensus as far as FXstreet.com contibutor's views go, that an RBNZ intervention is hardly viable.
See below a couple of examples:
RBNZ intervention is fruitless - Nomura
The RBNZ will not intervene - TDS
So the question that follows is, since recent Kiwi selling has been mostly fueled by fears of RBNZ intervention, will the market also come to the conclusion that chances are very low, thus reinstating longs into what is still a mid-long term bull market. Even if that was the case, which would strengthen the case for the upside bias to resume, the market may still need renewed dovish evidence from the Fed's commitment to continue it open-ended QE after last Wednesday's minutes.
A more Kiwi-negative, valid point of view comes from RBS FX strategist Greg Gibbs, who said earlier this week: "The RBNZ is much less likely to hike rates while the NZD remains "over-valued", so the market should now start to unwind that 30bp of hikes it has recently priced into the rates curve."
While it is often said that following other's advise when trading may not be the best idea, as overtime can cause more harm than good on one's discipline to stick to his/her own plan, it is interesting to note, from a fundamental perspective, how there is significant consensus as far as FXstreet.com contibutor's views go, that an RBNZ intervention is hardly viable.
See below a couple of examples:
RBNZ intervention is fruitless - Nomura
The RBNZ will not intervene - TDS
So the question that follows is, since recent Kiwi selling has been mostly fueled by fears of RBNZ intervention, will the market also come to the conclusion that chances are very low, thus reinstating longs into what is still a mid-long term bull market. Even if that was the case, which would strengthen the case for the upside bias to resume, the market may still need renewed dovish evidence from the Fed's commitment to continue it open-ended QE after last Wednesday's minutes.
A more Kiwi-negative, valid point of view comes from RBS FX strategist Greg Gibbs, who said earlier this week: "The RBNZ is much less likely to hike rates while the NZD remains "over-valued", so the market should now start to unwind that 30bp of hikes it has recently priced into the rates curve."