By Roger J Kerr I have been of the view for some months that the Kiwi would hold in the 0.5000's through most of 2009, certainly not trade below 0.5000, but not trade sustainably above 0.6000 for too long as well. The view was partially based around the USD itself remaining relatively stable on the world stage in the $1.25 to $1.30 area against the Euro. That view is under some pressure as the USD gets thumped down in the FX markets as speculation circulated last week that the US Government's AAA credit rating was under threat. Even after this, however, I cannot see that this US selling is permanent and sustainable. The EUR strengthened to $1.4000 last Christmas and quickly gave away the gains. Who actually wants a weaker USD currency value? - Not the Europeans, the last thing they want is a strong EUR exchange rate choking their exporters and economic recovery. - Ditto the Japanese. - Not the Asian surplus countries, which still have the vast majority of their reserves invested in the US. They don't want their currencies strengthening against the USD either. - Not the US themselves, their official Government line is still a strong dollar policy. The pump-priming and printing of more USD's is of course the reason cited as to why the USD is weakening. However this is not exactly fresh news, the markets have known this for some time. Back in December/January the USD was sold off on the USD TWI Index to 80.00, we are now back there again and my bet is that the USD will hold above this key level. It has been a quite a big run-up for the GBP, EUR, AUD and NZD against the USD in recent weeks. Looks ripe for profit-taking by the speculative players to me. For this reason I don't see the Kiwi holding too long above 0.6000 on this occasion. "”"”"”"”"”- * Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com
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