Latest Specific Currency Report - Sterling Vs. Kiwi Dollar 27th March 2009
Sterling is not having a good time of it in March, dropping sharply against most currencies as fears over our fiscal stimulus weigh on investor confidence. The same problems as we raised in the last update persist. Firstly the New Zealand dollar yields 3.00% compared to just 0.5% for sterling. Secondly, stock markets have been soaring the last two weeks, with the US Dow Jones index up 20% from its lows, inspiring investors to dip a toe back into the "riskier" high yielding currencies. That has boosted NZD, while sterling remains relatively unpopular. Only the US dollar has been less popular over the last week, since the Federal Reserve announced an increase in the size and scope of their fiscal stimulus package, which now extends to the purchase of government securities as well as toxic debt. That sent the US currency into a tailspin, giving investors one less safe haven, and one more inventive to look for yield elsewhere.
The technical outlook is dire. After being rejected from above the 2.60 level on Wednesday sterling sold off another ten cents and now looks set to test the 2.45 lows seen in January. Buyers of the New Zealand dollar should consider covering any requirement now in case of further downside.
Latest Specific Currency Report - Sterling Vs. Kiwi Dollar 5th March 2009
The Reserve Bank of Australia kept its benchmark interest rate on hold at 3.25% yesterday despite mounting evidence of economic storm clouds gathering in the region. This makes it more likely that the Reserve Bank of New Zealand will go for a smaller rate cut at their March 12 meeting than the 1% that was expected before the RBA decision. This change in expectation has helped NZD make solid gains this week after the market tested the key technical barrier above 2.8600 on Monday. You can see from today's chart that this level has been a major battleground over the last few months as repeated attempts to trade above there have been rejected. This time will probably be no different, so we are advising clients to take a cautious view and cover at least half of any NZD requirement now while rates are still close to 15 month highs. This currency pair is one of the only bright spots for Sterling, which has otherwise suffered severe losses in recent months.
As stated above, the technical outlook is highly precarious now that we've seen a negative reaction from 2.8600+. If you don't need your currency now, you could book a forward contract for up to one year ahead.
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