NZD/USD Fundamental Analysis August 22, 2013 Forecast

Analysis and Recommendation:

The NZD/USD is trading at 0.7936 tumbling 44 points today following yesterday’s decline after Reserve Bank Governor Wheeler introduced reduced interest rates for mortgages, which is effectively reducing one of the key lending rates. Although this might help stimulate the housing market in many slow areas it is devaluating the currency which Wheeler claims is overvalued. Reflecting on the reluctance of the Reserve Bank of New Zealand to hike interest rates to tackle the house price bubble, Governor Wheeler noted, “with policy rates remaining very low in the major economies, and falling in Australia, any OCR increases in the near term would risk causing the New Zealand dollar to appreciate sharply, putting further pressure on New Zealand’s export and import competing industries.” Wheeler also noted that with inflation below the bottom of the 1 to 3 per cent target range, there was no need to increase interest rates for inflation reasons, according to an article in Business Spectator.

The New Zealand dollar has found itself battered after tumbling as much as 200pts against the USD and the euro and 130pts against the Great British Pound since Monday’s open. Composing itself to open today at US 0.7960, up from a low 0.7953, the Kiwi dollar has had to fight its way above a tumultuous fall from grace across major crosses as a combination of local and international head winds buffeted the growth currency.

The early week emerging market sell off as precursor left international investors to cautiously remove risk as US treasury yields toy with 3% ahead of a highly anticipated tapering mandate this Thursday when the US Federal Reserve release its July FOMC minutes.

It wasn’t the only spur in the heel for the Kiwi. Aussie RBA minutes indicated additional rate cuts are still on the cards. Yesterday’s announcement by RBNZ Governor Graeme Wheeler about high loan to Value restrictions (LVR) coming in October, saw the Kiwi immediately trade lower.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.

Economic Data August 21, 2013 actual v. forecast

 

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