The NZD/USD continues to press higher. The average change from high to low over the last 15 years has been 15%. That is, if you take the high in any one calendar year, then the low, work out the difference and average that over 15 years you get 15%. So that’s about 10 cents worth of change, historically.
The issue then becomes, is this year going to be a 0.7000-0.6000 band or a 0.6500-0.7500 band. Given that the low was just below 0.6700 in March 2007, and we are at 0.7360 now, then 0.7700 is possible this year, and it is just a normal year.
The issue then becomes, is this year going to be a 0.7000-0.6000 band or a 0.6500-0.7500 band. Given that the low was just below 0.6700 in March 2007, and we are at 0.7360 now, then 0.7700 is possible this year, and it is just a normal year.
So those looking for a test of the post float high at 0.7467 in March of 2005 may yet get their wish.
Of course, all this is based on a weaker USD itself. This has been the case for a while now, as economists have fretted over the state of the US economy, and the arguments over whether US interest rates will go up further or come back again. I think the US will sit tight on their current interest rate settings. That means that unless the USD has a major shock, all time USD weakness this year should prove elusive.
Alan Bollard still looks reluctant to raise interest rates at best, and as long as our Finance Minister does not go and spend like a drunken sailor in the budget in May, Bollard may also, like the US, sit tight, and let the current settings do their work.
Don’t believe all the hype about the property market. Bollard focuses on that because it is a problem. And he gets a lot of press on that. But the bigger problem is government spending. For the first time in many years we have a finance minister with no debt constraints.
If you take Central Government, Local Government, Regional Councils, SOE’s (including power companies) they are probably over 50% of the economy. They are where the inflation is coming from….and raising interest rates does not affect them.
So the problem is, politicians need to spend to curry favour. Alan Bollard will be waiting to see what Cullen does. An expansionary budget means higher interest rates as monetary policy tries to lean against fiscal policy.
Then we will see a test of the post float high of 0.7467 and who knows, maybe a 0.7700 plus exchange rate.
Of course, all this is based on a weaker USD itself. This has been the case for a while now, as economists have fretted over the state of the US economy, and the arguments over whether US interest rates will go up further or come back again. I think the US will sit tight on their current interest rate settings. That means that unless the USD has a major shock, all time USD weakness this year should prove elusive.
Alan Bollard still looks reluctant to raise interest rates at best, and as long as our Finance Minister does not go and spend like a drunken sailor in the budget in May, Bollard may also, like the US, sit tight, and let the current settings do their work.
Don’t believe all the hype about the property market. Bollard focuses on that because it is a problem. And he gets a lot of press on that. But the bigger problem is government spending. For the first time in many years we have a finance minister with no debt constraints.
If you take Central Government, Local Government, Regional Councils, SOE’s (including power companies) they are probably over 50% of the economy. They are where the inflation is coming from….and raising interest rates does not affect them.
So the problem is, politicians need to spend to curry favour. Alan Bollard will be waiting to see what Cullen does. An expansionary budget means higher interest rates as monetary policy tries to lean against fiscal policy.
Then we will see a test of the post float high of 0.7467 and who knows, maybe a 0.7700 plus exchange rate.
A lovely present for hard done by exporters in Exporter year…. it’s in the governments hands now.
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