Nzd.usd

[peat]

i bailed on this short a few hours ago....6951
there must be some real flow comin in for it to buck the overall US$ strength trend

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what do you think of todays special report Xerof?

[Xerof]

Peat, wasn't attached to my email so haven't got it yet, but can guess what he's going to say - correction over and on to retest highs around 7450?

[Xerof]

Haven't been around much this week to follow anything closely - just back in today so will have a look at everything over the weekend and maybe put something up on Monday

But kiwi is ballistic on crosses..... Bollard must be poohing his pants

Xerof

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quote:Originally posted by Xerof

correction over and on to retest highs around 7450?

and the rest [:0]
as suggested elsewhere Bollard chould try some other avenues.

he could actually intervene... hell , lots of other CB's do.
that would be philosopically outrageous perhaps , but maybe pragmatism should sway.

General qestion to anyone.
What other options are available to him.

[Xerof]

Their only tool, other than intervention is the OCR. Anything else would need to come from the Pollies. Their stated policy on intervention is to 'take the froth off' highs and lows.

IMO intervention would have to be a last resort, and would only achieve a 2 or 3 cent reaction, unless their timing was impecable.

I do recall in early 1994, when the NZD was being trashed they raised rates 2 or 3 times on the same day. That stopped the rot dead in its tracks. We saw rates go from around 4% to 9% inside 12 months, and the NZD began a multi month rally from that very day.

Maybe they could [u]ease</u> rates in the same manner, (although the timing is surely not right just yet), but it wouldn't surprise me to see that happen in 2006, if the TWI was at 80 and the economy was experiencing a hard landing.

Other than that, give the Finance portfolio to Winston[8D][8D]

Xerof

[peat]

quote:Originally posted by Xerof

Their only tool, other than intervention is the OCR. Anything else would need to come from the Pollies. Their stated policy on intervention is to 'take the froth off' highs and lows.

IMO intervention would have to be a last resort, and would only achieve a 2 or 3 cent reaction, unless their timing was impecable.

I do recall in early 1994, when the NZD was being trashed they raised rates 2 or 3 times on the same day. That stopped the rot dead in its tracks. We saw rates go from around 4% to 9% inside 12 months, and the NZD began a multi month rally from that very day.

Maybe they could [u]ease</u> rates in the same manner, (although the timing is surely not right just yet), but it wouldn't surprise me to see that happen in 2006, if the TWI was at 80 and the economy was experiencing a hard landing.

Other than that, give the Finance portfolio to Winston[8D][8D]

Xerof

wow that would be amazing to see, several rates rises in a day!! That would make forex trading very intense. Of course no retail market then.

I was kinda wondering about the actual mechnnism for CB intervention. Guess at the end of the day hes just a trader like everyone else, cept maybe more with the goal of getting maximum impact for his spend.
And hah! , do you worry about losing as a CB. Damm I'm down 40 yards. Do you care?
How much would it take to move the Kiwi market. Surely you'd have to have a lot of courage to try to stem the Yen inflow. Deeeeeeeeeeeep pockets.

[zyreon]

-i think he'll raise it again
-do some OMO (open mouth operations)
-not intervene
-unless he raises it by 50bp

-and interest rate will continue to be a floor under an overvalued NZD... until signals of lower interest rate break the floor

+what happens when the Uridashis/eurokiwis mature? will they /can they roll them on or do they have to sell NZDs?

[Xerof]

Intervention can be very profitable for CB's Peat. I think the RBA has made a packet in the past as they are usually either selling at highs or buying at lows, and of course, they are usually right!

The BOJ has done pretty well too, but sometimes it has taken a while for their positions to come right for them, but eventually they get their way. I think last time they intervened was around 110, and it went to 104 before turning. They'll be offering around 125 I would guess.

The last major cycle before that saw them bidding at 85.00ish, then offering at 135ish - not a bad turn on a few hundred billion USD (plus forward points)

Zyreon - yes, no doubt about it, he'll tighten again, and probably remain hawkish as well.

The 'special report' Peat was referring to is basically calling for new highs above 7500, with 9000+ being an EW target[xx(][xx(][xx(]

I'll try to reproduce his wave count on my own charts and post it over the weekend (not an EW expert myself, but respect the power of the waves)

7500 is achievable shorter term I guess - 9000+ will need the USD to collapse against everything.

The Uridashi's etc may or may not roll - it'll depend on the trend at the time, but in the past they have only rolled if the currency is in an uptrend.

At the end of the day, these only work if the issuer can achieve attractive sub libor funding once its swapped back to their currency of choice, usually USD (which requires a swap curve well above bonds), and if there is appetite for high yield at retail.

Its the retail market that has all the currency risk, not the issuer, and they either don't understand the risk or don't care...yield rules OK

As well as these issues, we also have momentum models kicking into buy mode as we break higher and higher levels, mainly on the crosses, real money accounts, who play 'lets squeeze the export sector' just before the start of the seasonal peak every year like a broken record, and of course finally we have the local corporates who are probably undercovered (as usual) and are now squealing.

Its a potent combo if you have maturities coinciding with an economic downturn, as well as a down-trending currency - maybe mid/late 2006 will produce that scenario, but in the meantime have to keep an open mind...

Xerof

[Xerof]

And Peat, BOJ intervention is usually done via a panel of banks, who quote them well out of market and just go smash the price. Not sure about RBA - think in the past they have been seen direct via brokers but could be wrong on that.