Thread: NZD - A disaster waiting to happen

I had been searching at NZD fundamentals, it's interesting to remember that NZD/USD has reached such.

NZ is a small country with a restricted market. Dairy product are mostly exported by it. Due to high NZD over the past few months the exports have dried out. No person will be willing to cover a high cost for goods you can buy from other nations at less than half of the cost. The gap between imports exports has become enormous, resulting in negative trade balance, negative current account, which is difficult to sustain. Businesses are shutting down in NZ. Inflation is rampant. Adding to this US market is cooling that is going to put strain on countries such as NZ AUD.

Institutions are pushing the price of the NZD high because they seem to be on a spree of mindless buying. I worry for those who have trusted their cash into these so called finance managers who've purchased NZD/assets in loads without paying attention to the fundamentals. As the fundamentals perform within the next, these resources will depreciate significantly.

I recall few months back when NZD/USD was around 69. NZ fund ministry was leaping up down which NZD is too high, have'nt heard anything from him whenever the NZD is currently nearing 75. The exact same is true for EU ministers they went crazy with addresses which EUR is too high. EUR/JPY is unacceptable. The EUR/JPY level subsequently was approximately 155. It is 163. This goes to show you that these ministers have limited knowledge of fundamentals the rhetoric is hollow.

Please be on the watchout for following week. NZD dollar is only hanging by the thread. Its alteration is unavoidable can be a violent one. Do not get trapped.

Any comments will be appreciated

Best of luck.

KKK

Do you have some reliable reports or data that support your conclusions?

Thanks

Originally Posted by ;

I was considering NZD fundamentals, it is interesting to remember that NZD/USD has reached such a level which is difficult to maitain.

NZ is a small country with a limited market. It mainly exports dairy product. Due to elevated NZD Throughout the past couple of months the exports have dried out. No individual will be willing to pay a high cost for goods you may purchase from other nations at less than half of the cost. The gap between imports exports is becoming enormous, leading to negative trade balance current account, which is difficult to sustain. Businesses are closing down in NZ. Inflation is rampant. Adding to this US market is cooling which is going to put strain on countries like NZ AUD.

Institutions are pushing the price of this NZD high as they seem to be on a spree of dumb buying. I fear for those who have trusted their cash into these so called fund managers who've bought NZD/assets in lots without paying attention to the fundamentals. As the fundamentals play out over the upcoming, these resources will depreciate.

I recall couple of months back when NZD/USD was about 69. NZ fund ministry jumped up down which NZD is too large, have'nt heard anything from him whenever the NZD is currently nearing 75. The same is true for EU ministers that they were going mad with speeches which EUR is too high. EUR/JPY is unacceptable. The EUR/JPY level was approximately 155. Now it is 163. This obviously goes to show you that these ministers have limited understanding of fundamentals the rhetoric is hollow.

Please be on the watchout for following week. NZD dollar is barely hanging by the thread. Its alteration is inevitable could be a violent one. Don't get trapped.

Any comments will be appreciated

Best of luck.

KKK

An Superb fundamental analysis. It'll be interesting to see what happens.

Allowed while others of NZ might not be happy-the carry traders are. There is not much NZ can do about it's currency level since their currency floats freely in the open market. The Kiwi is going to also. At this point, they have to expect a window will open which will allow them to adjust rates down. Or at least discuss adjusting rates down.

Nice article though...

I'm not a major in economics but it confirms my suspicions.
In late 70s early 80s US dollar was strong, but inflation and recession was rampant, so possibly weak dollar is not so bad.

Anyone is welcome to confirm or disagree.

Here's a monthly chart of the NZD/USD....some food for thought?

http://img359.imageshack.us/img359/2...enshot1xj5.png

Originally Posted by ;

An excellent fundamental analysis. It will be interesting to see what happens.

Allowed while the people of NZ may not be happy-the carry traders are. There isn't really too much NZ can do about it's currency level at this time besides complain because their currency floats freely in the market. The Kiwi is going to also. Now, they must expect a window will open which will permit them to adjust rates down. Or at least talk about adjusting rates down.

Nice article though...

If New Zealand were to lower its interest rates appreciably, then high-yield seeking money (in particular carry trade) would be pulled out and invested elsewhere, causing the currency to weaken. Is not the current run up in AUD and NZD mainly driven by interest rates?

This is what Vegas had to say in one of the blogs about carry trading. It unwinds, the day, it's going to be hell for some and lots of money for others.
Vegas:


EUR/JPY
This pair was in buy mode since May 17th, and there's been no push at or beyond the first fib
extreme.
We traded once on the fall to the very first fib, nearly got stopped out, then sold to the rally back for a
very small reduction.
However, storm warnings are brewing in this pair making it extremely dangerous to be extended on breaks.
I told you before, major news releases all technicals, and on this theme we definitely have some major
news. For the very first time I could recall in a cross, politicians are getting into act. Last week, all hell
broke loose if some Finance minister in Europe talked about the EUR/JPY along with also the need for this particular
cross to quit enjoying because it was hurting European exports. He hinted that it will be a subject for
discussion in the upcoming G-7 summit in Singapore on September 15 -- 20th.
Nowthe issue here is the simple fact the entire world is extended EUR/JPY, and for that issue brief the
Yen in all the crosses. Yen was the”funding vehicle” for all of the carry trades over the previous few
years. Past history suggests when this carry trade drops out of favor with all the hedge fund community it
is going to be NASTY. I mean REAL NASTY. Account end horrible. Moves that make you think your
system is broken and can not possibly be appropriate. I am talking of anywhere from 500 to 2,000 pips in a
couple days. Moves that kill speculators and also make every politician happy in the idea. The last
suggests this is going to be the outcome.
There are TRILLIONS of dollars worth of these transactions on, and if this political talk which began last
week begins to gain traction along with other politico's in Japan and everywhere, seem out below. I will
guarantee you, right now, there are lots of hedge fund managers that are very worried about this pair
and their long positions. When [ not if ] these men hit the exit button at the same time it will get REAL
interesting. Your stop, in a situation such as this, is meaningless. Having a long position, you can very
easily get stuffed 700 pips away from your cease [ or worse ].
Let's be clear.
I don't know when it'll happen -- I only know it will take place. The dominoes are being set up. The
politico's are beginning to send the”between the lines” message into the investment community. Right now,
everyone would like to play fine. But, the cannonball was”shot across the bow”. It is only an issue of
time.
So, though we do not have a change top above the fib extreme, I am switching to sell mode within this
pair.

Everybody understands it's going to happen; I noticed soros talk of it not long ago. This is going to be a story that's going to be studied in universities accross the globe after conveys unwind.

Originally Posted by ;

If New Zealand were to reduce its interest rates appreciably, then high-yield seeking money (in particular carry trade) would be pulled out and invested elsewhere, causing the currency to weaken. Is not the current run up in AUD and NZD mainly driven by interest rates?

If they do that, they'll eliminate control of inflation.

Yesterday or the day before OZ was getting angry that the currency got to high up. Late last year when NZD was at a cheaper price, their guys was complainging about hedgefunds and carrytrades and said that the price should be in the .40's percent usd(it dropped good that day).

I had the perfect technical analysis with this(USD/NZD) pair from 3 months ago. Actually captured a wonderful drop. But it hasn't done what it should have since, kept climbing. I am a-waiting! But it had a good correction for 3 months.

So Far as the US, it is an importing nation. If I am buying something, I need dollars. The minority of things being sprinkled, whatever that is(pipes and planes?) Is not worth making those exports overpriced. If you don't would like to bring back those factories and ghosttowns online!

Originally Posted by ;

Should they do this, they'll eliminate control of inflation.

But will the large NZD drive NZ into a recession? A recession so bad they drop the rates and down comes NZD?