The NZDUSD opens at 0.8160 this morning after a volatile night.
The NZDUSD rallied to a 0.8210 high early last evening, before turning tail and dropping sharply to 0.8121.
However, the NZDUSD subsequently pushed back higher after a US Fed official dented expectations that the Fed will start to taper its bond-buying program anytime soon.
The market now awaits US Fed Chairman Ben Bernanke’s testimony before Congress early Thursday morning (NZ time) for further clues on the likely path of the bond-buying program.
Any reduction in the program is consider beneficial for the USD and hence negative for the NZD.
Global equity markets were mostly slightly postive.
Gold prices fell back over 1% to USD$1375 an ounce overnight.
The NZD opens at 0.8160 USD, 0.8320 AUD, 0.6320 EUR, 0.5385 GBP, & 83.60 JPY.
There is no data scheduled on the domestic calendar today.
Westpac Consumer Sentiment and Bank of Japan Monetary Policy Statement hit the tapes this afternoon.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here »
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1 Comments
However, the NZDUSD subsequently pushed back higher after a US Fed official dented expectations that the Fed will start to taper its bond-buying program anytime soon.
Nonetheless, the Fed has trebled the size of it's pilot Term Deposit Facilty in preparation to drain reserves from the system.
But as the saying goes, don't fight the Fed.
William C Dudley, the President of the Federal Reserve Bank of New York just confirmed what we always knew - BTFD.
Our view is that asset purchases work primarily through the asset side of the balance sheet by transferring duration risk from the private sector to the central bank’s balance sheet. This pushes down risk premia, and prompts private sector investors to move into riskier assets. As a result, financial market conditions ease, supporting wealth and aggregate demand. The fact that such purchases increase the amount of reserves in the banking system and the size of the monetary base is a byproduct—not the goal—of these actions.
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