90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: US$ weakens as Fed prepares to print more money; NZ$ rises vs A$; S.Africa's currency controls; Tower drops Fidelity Life bid

29th Oct 10, 9:00am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that the US dollar weakened again overnight as markets prepared for an expected announcement next week of a second round of quantitative easing or money printing known as QE II.

The US Federal Reserve checked with its primary dealers this week about the expected size and timing of the money printing, reinforcing expectations that the US Federal Reserve would announce a second round of printing next Thursday morning our time.

Markets are expecting around US$500 billion to US$1 trillion worth of quantiative easing where the US Federal Reserve creates new money to buy US Treasury bonds, effectively monetising government debt.

The New Zealand dollar strengthened to 75.4 USc and the Australian dollar rose to 97.9 USc, but the New Zealand dollar also rose to near a one month high vs the Australian dollar because weaker than expected inflation data in Australia watered down expectations of a rate hike over the Tasman on Melbourne Cup day next Tuesday.

Meanwhile, elsewhere in the currency Tri-Nations, South Africa is moving to protect its exporters by trying to keep the rand from rising amidst the Currency Wars.

The government announced overnight it would allow further South African investment overseas to encourage Rand sales and it transferred funds to the central bank to intervene to sell the Rand on currency markets.

Back in New Zealand, Tower announced it would let its hostile takeover bid for locally owned insurer Fidelity Life to lapse while it considered the results in Fidelity's latest accounts.

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6 Comments

by steven | 29th Oct 10, 1:10pm 1288311028

http://www.telegraph.co.uk/finance/economics/8094324/EU-haircut-plans-r…

"A draft proposal from Berlin – now serving as a working text for the European Commission – calls for "orderly insolvency" by eurozone countries in trouble. Details are sketchy but this "Chapter 11" for sovereign states would include an extension of debt maturities, a "holiday" on interest payments for as long as needed to let debtors recover, and a suspension of bondholder rights. The blueprint is akin to debt-restucturing schemes used by the International Monetary Fund. "

Why do they think bond holders will even put money in?

The line I always remember was when Venezeula's President announced a price freeze on food....so eggs for instance simply disappeared off the shelves, no one would sell them to the shops and make a loss....same in this instance, Govn's seem to forget where they give the investor an option, the investor will take the one that doesnt suit the Govn....so that leaves the central banks buying bonds and the tax payer who has no option taking the hair cut...like duh.

regards

by powerdownkiwi | 29th Oct 10, 1:20pm 1288311648

It's all like watching a train-wreck from out in the paddock.

The one they didn't subdivide.

by steven | 29th Oct 10, 1:31pm 1288312272

Yep......

I would take huge convincing that this is indeed now not an unstoppable event....what's suprising me is just how its hanging in still.....can we even last to xmas i wonder....and the bank economists think its all rosey.....

I guess its a case of musical chairs and everyone knows but its the only game in town...so the Q is was one seat taken out, several or all?

regards

by powerdownkiwi | 29th Oct 10, 1:40pm 1288312846

I think one of the things I underestimated was the sheer inertia. A train comes to mind again - that chain-reaction clunking in the shunting yards, as they stop or start. Takes a while for a change of direction to reverberate through the system.

by David George | 29th Oct 10, 1:49pm 1288313351

"Why do they think bond holders will even put money in?"

The word is that the ECB have slipped the Irish a few billion fresh ones, Zimbabwe Ben style. Can't imagine the Germans are going to be too pleased with that.

by Fred | 29th Oct 10, 1:50pm 1288313445

Time that someone says that "sovereign bonds" are a thing of the past and should not apply when a fiat currency circulates. It's either bonds plus banknotes (ie notes issued by banks) or no bonds and fiat notes and "real" reserves posted by banks with their central banks.

Swap bonds for fiat currency, introduce freegold, and capital controls (as the real money reappears and tries to swoop on real assets) and let the market apply the austerity measures.