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NZ Rates Remain Stable; Upside Vol Worth Looking At
NZD yawned as the Reserve Bank left rates untouched (in line with consensus projections). The central bank governor Alan Bollard provides some color on the New Zealand recovery, noting a recovery in export partners (which he believes is sustainable), flattening consumer demand and a recent increase in housing prices. He goes on to note that sustained growth is contingent on the export sector and household savings.
Nothing revolutionary here as the focus on the current account continues but we have to believe volatility in NZD rates is currently being underpriced. With the strength and diversity of various China bear factions at this point, it's almost a foolproof bullish indicator. Additionally, some exports may be more downturn-proof than we believe (e.g. milk powder, see the ZH piece on NZ May trade data). The flip side also begs a simple question: how much lower can they go? It is almost inconceivable for NZD to go ZIRP.
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upside vol worth looking at? Are you smoking, have you seen NZD recently, its already too high in the short term, if anything it needs to cool off.
Rates, not FX.
NZ's Net International Debtor Position, which is fast approaching 100%, might shock the NZD to gasp for air.
As much a bear as I'd like to be given the realities of our world, I just see markets continiously meandering up, until a few major nations decides to hike their rates up. Sooner or later they have to.
The world/Americans just has to accept the fact that we've been living in a fantasy world for last 30 or 40 years, hopefully we'll consume less and be less materialistic when/if we come of this mess. But then again, that might be a litt too optimistic.
whats wrong with the Europeans this morning ? why are they selling ? have they not had their daily doses of Obium ?