US producer prices rise; Wall Street fades; Shanghai surges; OECD sees leading indicators turn lower; China cuts rare-earth exports; UST 10yr yield at 2.15%; oil and gold stable; NZ$1 = 65.9 USc; TWI-5 = 70.5

They played a huge part in the housing bubble in the states leading up the GFC.

Like everyone else, they got away with it of course.

Great article!

Those silly Australians with their obsession with obsolete industries like mining, eh. So last century.

China may control 90% of the global production of rare earth minerals, which involves processing and refining the raw ore into a usable material, but they don't control all the ore in the world.
Experts claim that although not as abundant as oxygen or silicon, these minerals are "moderately abundant" and significant deposits can be found scattered across Brazil, China, India, Australia, and the US. To be fair, the "rarity" status of these minerals was established decades ago when extraction methods were not as advanced.
https://www.theverge.com/2019/5/23/18637071/rare-earth-china-production…

You prompted me to think about factors influencing NZD/USD currency pair values.

A while back interest.co.nz hosted this article:

Victoria University Economist Geoff Bertram has proposed the Reserve Bank force New Zealand's banks to reduce their foreign currency borrowings to reduce the pressure on New Zealand's dollar and its export sector.

Bertram delivered a paper detailing the recent history of New Zealand's monetary policy, foreign borrowing and the New Zealand dollar to a Fabians' Seminar "Fresh Ideas for a Productive Economy" in Wellington last week. A full version of the paper is here.

In it he argues that New Zealand's inflation-targeting regime, its free floating exchange rate, unregulated capital flows and a sharp increase in foreign currency borrowing by New Zealand's banks since 1993 have had the effect pushing up the currency.

This has helped the Reserve Bank use the currency to suppress tradeables inflation and offset relatively high non-tradeables inflation.

Link

The upward pressure on the NZD/USD pair is caused by foreign investor purchases of NZD to underwrite foreign NZD debt issuance (Kauri bonds) which constitutes one leg of the foreign borrowing hedging facility (cross currency basis swaps). Thus:

by Audaxes | 5th Jun 19, 6:29pm

For example, NZ banks borrow Eurodollars in London, World Bank borrows NZ dollars (Kauri). To hedge, both parties swap borrowed currencies at the current FX rate over three or five year terms. The basis currently ~21 bps for the 3yr tenor is paid by the NZ banks which affords the World Bank sub-Libor financing costs at the agreed reset dates. Large currency moves in either direction evoke collateral calls. I call this paying tribute to a foreign banking entity.

Link

The RBNZ recently confirmed hedged foreign borrowing is currently ~$100 billion:

Increased cross-border financial flows in recent decades have increased links between New Zealand’s financial system and those of the rest of the world. Currently, around a third of New Zealand banks’ debt and equity funding is issued abroad. This diversifies banks’ funding sources. However, the global financial crisis (GFC) illustrated that offshore funding markets can be susceptible to unexpected increases in funding costs or reduced access to funding. Banks have reduced their reliance on offshore funding since the GFC.

Banks’ offshore funding is typically issued in foreign currency. The banking system currently has around $100 billion of foreign-denominated debt liabilities, primarily in US dollars and euros. Banks use derivatives to hedge their foreign exchange (FX) risks. Around 95 percent of their offshore FX borrowing is hedged, with most of the remainder ‘naturally’hedged with foreign currency assets. FX risk is largely eliminated by these hedges, but risks can emerge in some circumstances (see box A).

Link - page 14 (20 of 48)

I don't mind clicking to read more if it interests me, but it would be good if comment streams were hidden once they degenerate into bickering between two individuals.