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Monday, September 19, 2005

¥€$, $€££ £€$$

Trading in the Kiwi dollar at the moment is a bit under the weather. More bad news with our gigantic Current Account deficit (which I and everyone else have warned of but only Winston Peters really seems to care about) today. NZ inflation will blow out to 4% next year! Hello! If the Fed hikes interest rates to counter US inflation soon (as has been talked about) AND Labour does a deal with the Maori Party and the Greens will this trigger "a rapid and substantial market-led exchange rate depreciation," that Treasury in it's pre-election fiscal update has warned us about?

It is all explained in this post of 6 Sept.: "Just passed the US$0.71c barrier in trading - buy US$ now with your Kiwi - it won't be much more affordable than this."

UPDATE@6:30pm 19 Sept.
NZD fell through 70c late this afternoon.

UPDATE@10:30pm 19 Sept.
Canary in the Mine reports:
Statistics New Zealand will release the latest current account figures, also known as the balance of payments, on Wednesday...Ten economists polled by Dow Jones forecast the median quarterly deficit for June would swell to $2.6 billion, or 7.5 per cent of GDP for the June quarter. The last time the current account deficit was higher as a proportion of GDP was in March 1986, when it was at 8.9 per cent. Any level above 5 per cent of GDP is usually an alarm signal to international investors. Reserve Bank Governor Alan Bollard says this is not sustainable.

UPDATE@5:30pm 20 Sept.
Independent reporting:
The euro also dropped ahead of expectations the US Federal Reserve's will raise its benchmark interest rate tomorrow, widening a gap with the European Central Bank.
Therefore:
Tomorrow, Wednesday 21 September we have a possible interest rate hike of the Fed and a possible current account blow-out being reported by Stats NZ. Add to that political instability and the alignment is beginning. I hope you have put your NZD into USD by now. We're presently at 70.2c

12 Comments:

At 19/9/05 4:11 pm, Blogger Cathy Odgers said...

Tim

I have been in contact with a broker in the US I deal with whose clients invest primarily in NZ to the tune of several hundred million USD. He states: "What is this I hear about a coalition government in NZ consisting of socialists, green activists, Maori activists and former Communists. My investors do not like it, Cathy, how is Australia looking these days".

He wants me to prepare a paper on it. I directed him to David Farrar's blog and told him to take notes.

Part of me wants to simply tell this guy to take the money out of NZ and run away. Run Forest Run.

I had not even told him of one MP's promise to run naked through the streets of Auckland.

Its all whacky backy stuff.

Lets ditch MMP.

 
At 19/9/05 4:45 pm, Anonymous RR said...

All those USD/Sterling/Euro dollar assets in the NZ Super Fund starting to look very prudent right about now.

 
At 19/9/05 5:36 pm, Blogger t selwyn said...

Cathy:
Go girl! I notice the Kiwi is down below 70c now. Smart money to cash out now (although my original recommendation was at 71c - which we hit on the 6th or 7th just after I made my call). We are so over-exposed with "Eurobonds" in NZD that one might expect those holders (Belgian dentists?) to act to stabilise their investment somehow before it matures down the line... but our structural problems seem overwhelming.

PS: I love MMP. I love the uncertainty. I love that the bastards have to work for it rather than have it given to them on a plate. I love how almost every vote cast counts. Act exists (only just) because of MMP.

RR:
Yeah, that wiley Dr Cullen. As I've said before I can't work out whether he's a fool or a genius - stashing it all overseas like that. He gets an appreciating asset (because of the projected currency decline) in NZD terms and also gets a triple A credit rating to boot. I guess the future retirees should be grateful at this point.

 
At 19/9/05 7:37 pm, Blogger Antarctic Lemur said...

I guess the future retirees should be grateful at this point.

Unless they die "early" or their partner passes away before they do.

 
At 19/9/05 8:48 pm, Blogger stephen said...

I'd tell him to chill, Cathy. Or at least be prepared to make a play once the reef fish have fled. Concretely, I can't see much difference between the coming Labour-based coalition and the last one, except that this one's going to find it harder to get its policies through. If Mr Moneybags was content with the last three years of Cullen he should be looking forward to the next three.

Maybe you could send him a copy of the Cato Institute's report while you're at it.

 
At 19/9/05 8:50 pm, Blogger Cathy Odgers said...

Tim

ACT only HAD to exist because of MMP as part of the split from Labour those who were more National than ever Labour. As a brother for National if you like. Great National - kill off your own family. Smart.

I am preparing my report now. And it is a long weekend here in HK. Americans just cannot understand the whole set up at all. I am sure a few clients are european dentists.

I sent over some profiles from a PR company regarding the lineup of fringe MP's and possibilities.

My mild mannered American broker emails back "Fuck, why don't you stand some sheep to Govern, they would be more predictable".

I can see the money draining out of NZ in the next wee while as more truths come out about the more radical elements NZ now relies upon to form a Government.

Makes Winston look all the more stable...

 
At 19/9/05 8:54 pm, Blogger Cathy Odgers said...

Stephen

If you wait until the reef fish have fled it is too late. These guys are speculators. In, out, cut, run. Loads of money in NZ right now under those conditions. Yep, it is all flaky. Waiting for the Big Sneeze.

Basically they don't like the Maori separatists holding the country to ransom I have found. And US financiers hate Greens being involved in anything.

You are wrong comparing it with the last 3 Cullen years. Cullen will have to suck some serious face to get Greens and Maoris onside. Last time they didn't.

Tim is right though, MMP is much more exciting. If you like excitement in politics.

 
At 19/9/05 9:02 pm, Blogger stephen said...

Have you told them the Maori separatists are insisting on preserving their common law property rights from nationalisation? ;-)

Personally I would pleased if the dollar did drop. The NZX is overpriced, exporters could do with it, and most of my assets are offshore.

By "waiting for the reef fish to come back and make a play", I meant that the smart punter would be out now and back in when NZ assets have dropped below fair value, not that I need to point that out to you I know. I realise now that was ambiguously put.

 
At 19/9/05 9:24 pm, Blogger t selwyn said...

Cathy,

You might want mention Treasury's PREFU forex warning in your report and those more recent inflation projections too. Or is it a political risk report? As long as it doesn't have a picture of a naked Keith Locke and a caption: "potential cabinet minister". I don't think the brokers would take to kindly to that.

AL: Good call on the super: see SageNZ for a good discussion of this re: WInston's coalition carrot.

 
At 20/9/05 9:33 am, Anonymous RR said...

There's that individual accounts arguement again. Have we seen as much inter-party compromise as we're ever going to see with this super issue? Is it merely that Winston come up with this one, therefore it somehow must be wrong?

 
At 22/9/05 2:01 pm, Blogger peterquixote said...

we hopes that stephen not a relative of catherine judd because we going to sack catherine judd so soon, evidence and grievance going back three years, and there nothing like the fascist to carry grudge,
Catherine Judd goes, my letter to her resignation go out next week, copy on my site, there no escape, for her this time, i will escalate the campaign till she go, we are full committed, first Judd goes, then the board, evey single smarmy little meaningless right wing poofter, failure of resignation will result in allegations of ugly nature, we mean to be rid of her,

 
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