Here's my summary of the key news overnight in 90 seconds at 9 am, including news the New Zealand dollar hit a nine month high overnight against the US dollar and has firmed against the Australian dollar.
The New Zealand rose to 83.92 USc in morning trade, having broken through resistance at 83.6 USc. It also firmed towards 80 Australian cents after weak Australian business confidence made the New Zealand dollar look relatively more attractive.
Fresh data showing a surge in house prices in Auckland beginning to spread to other parts of New Zealand also raised expectations that a more hawkish Reserve Bank under new Governor Graeme Wheeler may have to act to cool the housing market, either with a higher (or at least not lower) Official Cash Rate or the use of other macro-prudential tools such as loan to value ratio targets.
On a Trade Weighted Index basis, the New Zealand dollar has risen 6.7% this year to 74.83 this morning, its highest level August 1 2011 when it peaked at 75.05. Prior to that, the New Zealand dollar rose to 76.6 in July 2007, but was soon knocked off its perch by intervention by the Reserve Bank of New Zealand to sell New Zealand dollars.
Wheeler has repeatedly said he is reluctant to intervene in the currency and the Reserve Bank is not expected to do the same again.
US stocks closed up 0.74% overnight after some hope emerged of a deal on the US fiscal cliff and German business confidence was better than expected, offsetting some of the concerns about a slowing German and European economy.
There is also talk the US Federal Reserve will shift its buying of mortgage bonds in its 'twist' programme into buying US government bonds. This would further lower long term interest rates and make US stocks more attractive.
It would also further widen the interest rate differential with New Zealand interest rates, making the New Zealand dollar more attractive.
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2 Comments
"Whatever else New Zealand law states, it is certainly well established that it is most improper for 'a client', especially a legally trained client, to attack publicly a lawyer's advice while simultaneously claiming privilege to protect from disclosure the advice that is being attacked. I would expect that the Minister, as a former Auckland tax lawyer, would be well aware of this principle.''
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10853509
Justice Binnie now has a better understanding of how the NZ govt operates!
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