Nzd.usd

[arco]

Interesting article on Stuff

'Whopper' current account deficit set to inflate further
21 September 2005
By KATE PERRY

New Zealand posted the worst annual current account deficit ever in the June year, an amount equivalent to every New Zealander overspending by nearly $30,000.


The $11.89 billion annual deficit was the worst in dollar terms, Statistics New Zealand said today.

Economists estimate the deficit equates to 8 per cent of GDP – the second worst behind a 9.0 per cent deficit during the first oil shock in 1975.

The deficit, also known as the balance of payments and measuring all transactions with the outside world, will worsen as our petrol bill swells.

"It's a whopper," said Goldman Sachs JBWere economist Shamubeel Eaqub. "The very large and worrying deficit reflects the imbalances facing the New Zealand economy."

The June quarter deficit swelled to $2.85 billion, $1 billion higher than the March and June 2004 quarters.

The deficit has to be bridged by borrowing from overseas and economist warn foreign investors may be leery of lending when the deficit gets too big. When that happens, the New Zealand dollar is likely to plunge.

AdvertisementAdvertisementFirst NZ Capital economists expect the deficit to peak at 9 per cent of GDP next year, far exceeding Reserve Bank forecasts. RB governor Alan Bollard projected in his quarterly Monetary Policy Statement last week that the deficit would reach 7.25 per cent at the end of next year and stay there for a couple of years. Even at 7.25 per cent, Dr Bollard said the deficit would be unsustainable.

The strong domestic economy has fuelled the spending spree, with consumer demand for cheap imported goods on the rise along with a rising petrol bill.

Growth in imports outstripped exports leading to a deficit in the goods balance of $721 million.

The value of goods exported in the quarter was $7.86 billion, while the value of good imported was $8.58 billion.

Import prices were up 1.5 per cent between the March and June quarters, driven by petrol and petroleum prices, which rose 23.6 per cent.

The deficit on investment income was $2.6 billion, as the strong economy translated into improved corporate profits and higher dividends. This in turn led to a pick-up in dividend flows to offshore owners of New Zealand companies.

The widening deficit is expected to weigh on the New Zealand dollar in the medium term, but not have a big negative impact in the short term.

ASB economist Kate Skinner said it was likely to have an impact on the kiwi dollar at some point next year.

"Rather than being the initial catalyst, a widening current account deficit is likely to exacerbate the depreciation in the New Zealand dollar caused by either a strengthening US dollar and, or, a deteriorating growth outlook for New Zealand."

The currency market was focused on the US Federal Reserve's 11th rate rise. After the current account release the New Zealand dollar initially dipped to US69.65c from its US69.79c opening but later recovered.

International credit rating agency Standard & Poor's said it was unperturbed by the size of the deficit.

"From our point of view, it is a concern and a weakness in relation to the credit-worthiness of the Government, but it's not a huge weakness because there are sufficient mitigants," Fharad Jain a director of S&P's sovereign and public finance ratings unit, said.

He said half of New Zealand's foreign debt was denominated in New Zealand dollars and of the rest, about 90 per cent was hedged.

"Also, Government financials are in a strong position, so if a high current account were to result in a currency deterioration, and as a result, impact on the private sector or the banking sector, the Government has enough flexibility to support that. "Whilst it's a concern, we don't think it's an excessive risk that will affect the rating in the immediate future."

Mr Jain said the agency was also not unduly worried about a loosening fiscal position as a result of prom

[peat]

kiwi quite shakey perhaps....
even martin@global-view commented and he has been mute for quite some time.

[Xerof]

Peat, GCM's been about, but on the pay to view side of GVI.
Has been quiet there too really and today would be his most vocal for a long time.

NZD - everyone wants to sell it...but...plenty of demand still, despite:

election mess
Current account woes
'banana republic' quote from a local bank economist, trying for the 8% depreciation in a day that the AUD took when Keating used that phrase


so we wait for something to happen.

My best suggestion given its current state of torpidity is to trade the break...and don't get transfixed with which direction that might be

http://img389.imageshack.us/img389/589/nzd4uq.jpg

Xerof

[arco]

Probably worth repeating the info here (from the Chit-Chat thread).

In the long term we have to remember NZD has come a long way from Oct 2000 when it reached a low of .3905. The recent high may be hinting at a triple top, and a fall from that on Fibonacci retracement values say of 50% would equate to a drop to circa .5700. That may tie in with the resistance area of 6/5/1999 - .5663

In the short term NZD looks vunerable if it breaks the major Gann at 6836 and it could then continue down on a Butterfly final leg to btw 6700-6800. (with minor Gann @ 6714)

arco

[zyreon]

possibly, there's a few bits of data out this week that may catalyse such a move

[slam]

This may give it a nudge down

Slam

"[22:47 NZD/USD: August Trade Balance A NZD1.105bln Deficit] Against a median
market forecast of NZD850mln. This continues the run of disappointing NZ data."

[arco]

Morning Slam

Reuters EOD - Shwoing a nice touch on the Major Gann line 6836, and looks like it could break soon. Ideal low risk limit entry just below the pivot/Gann IMO.

arco

[slam]

Hi arco
I jumped on about 2 mins before the above announcement so dropped stop to entry (6864)
Dumb luck[8D]

Cheers
Slam

[slam]

Closed short
Looking for a bounce, may not be a big one imo

Cheers
Slam

[slam]

Back in again[:I]
Just in time for that nice red candle
Kiwi not getting much bounce these days.

See if I jumped the gun or not

Cheers
Slam

Edit Short AUD as well