Investors in the Kiwi getting frustrated; mixed signals on international economies; dairy auction lower

by Raiko Shareef

NZ Dollar

The NZD was the weakest performing currency over the past 24-hours, down 0.7% against the USD.

The currency was fairly stable until the release of the RBA minutes yesterday afternoon. It was then dragged lower with the AUD/USD as the AUD’s initial pop higher was pared back.

However, unlike the AUD, the NZD failed to bounce off its overnight lows. It remains just above the 0.8300 level this morning.

There were no clear news or data drivers behind the NZD’s underperformance. We suspect that repeated failure of the NZD/USD to breach short-term resistance around 0.8390 has frustrated some investors, leading them to reconsider long positions.

In the early hours of this morning, the fortnightly Global Dairy Trade auction saw the GDT Price Index fall by 1.2%. But average prices remain over 40% higher than they were a year ago, so we do not read too much into this latest result.

Today, the RBNZ will release its weekly mortgage approvals data. These have taken on greater importance since the introduction of the RBNZ’s LVR restrictions last October. Still approvals do not seem to be unduly impacted by the RBNZ regulations.

Otherwise the NZD/USD will be looking toward tonight’s release of US Fed Minutes for January. Resistance for the NZD/USD will likely remain on any approach toward 0.8400. Near-term support is eyed around 0.8290.

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Majors

The JPY weakened, the EUR strengthened, and the AUD simply could not make up its mind, in one of the more eventful overnight sessions of the past week.

Yesterday afternoon, the AUD dropped initially and then shot higher on the release of the RBA Board Minutes from the January meeting. They confirmed the RBA’s new neutral policy stance, and added little else to the debate, merely repeating themes covered in the recent Quarterly Statement on Monetary Policy. As such, the initial gap higher in the AUD/USD was somewhat surprising. However, the currency then more than retraced its gains. Subsequently it has bounced off intra-night lows close to 0.9000 to trade at a similar level as yesterday morning (currently 0.9030).

The Bank of Japan announced an expected extension and unexpected expansion of its bank lending facilities at its policy meeting yesterday afternoon. This is not expected to have a meaningful impact on the economy, given funding for banks is already very cheap. However, investors saw the move as a signal that the Bank of Japan is willing to act, as momentum achieved by its earlier “quantitative and qualitative monetary easing” begins to wane. Markets continue to expect an expansion of that policy tool in June. The JPY weakened on the announcement. The USD/JPY sits at 102.40 this morning, having been just below the 102.00 mark pre-announcement.

In Europe, the ZEW survey gave mixed signals, with the current situation index rising to its highest level since August 2011, but the expectations index falling by more than expected. Overall, this was positive for EUR/USD, which rose to trade at 1.3760 this morning.

This was also helped by weaker-than-expected US data. Both the Empire manufacturing survey and the NAHB housing market index fell short of consensus expectations, but both can claim some weather-related impacts. Consequently, the USD index traded from above 80.20 last night to around 80.00 currently.

Tonight sees the Bank of England Minutes and UK employment data, while the Fed releases the Minutes of its January meeting in the early hours of Thursday morning (NZT).

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