By Roger J Kerr We continue to witness resilience and a stiff resistance by the Kiwi to going below 0.5000 against the USD. The forex market has attempted to push it down lower on a number of occasions, only to discover no follow-through selling interest at all. The fact that the Kiwi has held its ground over these past two weeks against lower commodity prices, lower Dow Jones Index and a generally stronger USD itself, is something of a testimony and confirmation that the selling interest in the Kiwi has been exhausted. I cannot see what further bad economic news could be that would cause NZD selling from here.
If there is any vulnerability, it is a lower AUD dragging the Kiwi down with it. The RBA are also not so sure that lower interest rates will do any good in restoring their economy out of recession. The worst could be over for the AUD in this respect. It has to be said that the RBNZ will most likely paint a very gloomy and almost desperate picture of the NZ economy being totally reliant on an imploding global economy when they release their Monetary Policy Statement on the 12th of March. Their economic overview is bound to be overly pessimistic and cause short-term NZD selling. But, as time goes on and the reality turns out to be not as bad as the RBNZ forecast, the NZD/USD exchange rate will move back up again. If there is a danger period of the Kiwi going into the 0.4000's briefly, it is over the next few weeks. ------------ *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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