I have been trading the NZD for over 30 years. I have never seen the NZD/USD move as far, as fast...ever!
Thank God it's Friday, but still getting offshore calls wondering when it is safe to buy again.
I posted here in July that I thought the NZD had topped out, and I repeat:
The NZ dollar has topped out at 0.8109, nearly 17% from the lows seen at 0.6715 in March 2007. Now looks to retrace and could pull back into the 0.7400 area before stabilising.
The reason?
Not our economy, Not the RBNZ actions, Not any Government moves.
Purely offshore pressures.
See story below: Volatility sweeps global markets.
That's the reason: the rise of global risk aversion; something the RBNZ has been praying would happen.Investors are pulling money home, worried about potential losses.
It could run some way yet, as the US property market disasters come home to roost.
That means, currencies that were weak, like the Yen and Swiss franc, will be stronger, as funds are repatriated.
Currencies that were strong, like the NZD, AUD and GBP, will be weaker, as funds are withdrawn.
That means the NZD will weaken.Might not go too far yet, but that is the trend, with the first target 0.7500.
What would stop this going too far are calm markets.8.25% return is hard to beat, and that means the NZD cannot stay down for long.
Equally the Japanese will not want a strong Yen, and may talk of intervention again.
But for now, and the next few weeks, the NZD is finally on the back foot.
Well it has certainly gone further than I thought it would.
But the short NZD position taken at 0.7950 will certainly pay a few bills, having just exited at 0.6750.
Best to stay out of the markets now, until things stabilise.
I think the NZD/USD is close to the base around 0.6600-0.6700 area.
The next trade will be buying NZD selling JPY, ie a carry trade (yes they still work really well!).
But looking for the entry point at present. With any luck the Bank of Japan will start to protest at the stronger Yen, and a base in the NZD/JPY will appear.
Saturday, 18 August 2007
Sunday, 12 August 2007
New NZD Kauri Bond issue
Who says offshore investment is drying up?
WASHINGTON, Aug 10 (Reuters) - IFC, the private-sector arm of the World Bank, said on Friday it had launched its first-ever New Zealand dollar Kauri bond, issuing a five-year NZ$300 million note to raise funds to support poverty reduction work.
The notes mature on Aug 23, 2012 and carry a coupon of 7.75 percent, paid semi-annually, and were priced to yield 82 basis points over the benchmark New Zealand government bond, IFC said in a statement. A Kauri bond is a New Zealand dollar-denominated bond issued by a foreign issuer. It can be sold to both domestic and international investors.
The issue was joint lead-managed by ANZ Institutional and Bank of New Zealand, and the notes were placed with both local and international banks and find managers, IFC said. The proceeds of the issue were swapped into floating rate dollars and will be used to finance IFC's operations to support and encourage private enterprise in developing countries.
WASHINGTON, Aug 10 (Reuters) - IFC, the private-sector arm of the World Bank, said on Friday it had launched its first-ever New Zealand dollar Kauri bond, issuing a five-year NZ$300 million note to raise funds to support poverty reduction work.
The notes mature on Aug 23, 2012 and carry a coupon of 7.75 percent, paid semi-annually, and were priced to yield 82 basis points over the benchmark New Zealand government bond, IFC said in a statement. A Kauri bond is a New Zealand dollar-denominated bond issued by a foreign issuer. It can be sold to both domestic and international investors.
The issue was joint lead-managed by ANZ Institutional and Bank of New Zealand, and the notes were placed with both local and international banks and find managers, IFC said. The proceeds of the issue were swapped into floating rate dollars and will be used to finance IFC's operations to support and encourage private enterprise in developing countries.
Thursday, 9 August 2007
US housing crisis deepens further
American Home Mortgage has filed for bankruptcy in the latest sign the US housing crisis is spreading from sub-prime mortgages to the higher grades of credit risk.
The collapse of America's 10th biggest home lender came amid fresh gyrations on global bond and stock markets yesterday, and growing questions over the exposure of European banks and insurers to the US property slump. Credit Suisse warned that 1.5m people were likely to default on home loans worth up to $220bn (£108bn) as a huge tranche of mortgages are adjusted upwards over the next 18 months. AHM, which issued $60bn of loans last year, asked for Chapter 11 protection from creditors and began laying off almost all of its 7,400 employees after banks abruptly cut off access to credit.
It cited a "sudden adverse impact on liquidity from the extraordinary disruptions now occurring in the secondary mortgage and real estate markets". Unlike the other 50-odd sub-prime lenders that have gone bankrupt or closed since late 2006, AHM specialised in "Alt-A" loans for mid-tier borrowers thought to be a good credit risk. The company said yesterday that the market for Alt-A debt packaged as collateralised debt obligations (CDOs) had completely dried up, making it impossible to continue normal business.
While outstanding level sub-prime debt in the market is roughly $800bn, the Alt-A segment is a close second at $700bn, mostly issued in 2005 and 2006. The rating agency Moody's said Alt-A loans are in reality little better than sub-prime debt, which already faces a default rate of 12.4pc.
Merrill Lynch said the property slump was now so serious the Federal Reserve would have to start cutting interest rates as soon as October, predicting a fall from 5.25pc to 3.75pc by the middle of next year. The steady drip-drip of bad news from the US continued to irk Europe's bond markets yesterday. The iTraxx Crossover index measuring spreads on low-grade corporate bonds surged from 400 to 430, before falling back as Wall Street rebounded from last week's violent sell-off.
Suki Mann, a credit analyst at Societe Generale, said virtually all refinancings and leveraged buyouts had been frozen as investors stood on the sidelines. "Everything is on hold. We're not going to see any deals done until there is some clarity." The Dow Jones rose 73 points to 13,225 in early trading as markets began to settle after the resignation of Bear Stearns co-president Warren Spector, who stepped down on Sunday after the collapse of two in-house hedge funds that set off the global bond bust two months ago.
The group's chief financial officer, Sam Molinari, alarmed Wall Street late on Friday by comparing the credit debacle to the dotcom denouement in 2001 and even the 1987 crash. "I have been a mortgage banker for 20 years and have never seen such a severe reaction to credit risks in the marketplace, and things may even get worse before they get better," he said.
Similar fears have begun to emerge in Germany where Jochen Sanio, head of the financial watchdog Bafin, said the credit squeeze threatened Europe with the most serious banking crisis since 1931.
IKB Deutsche Industriebank stunned the markets last week with an admission that it had taken a massive $24bn bet on the US property market without fully informing the board, and suddenly faced imminent collapse. Just 10 days earlier it had claimed to be in rude good health.IKB is being rescued by a consortium of banks offering a \u20AC3.5bn (£2.4bn) credit line, while the state-owned KfW bank has provided an \u20AC8bn guarantee for bad debts. The bail-out, orchestrated by the German government, is facing a Brussels probe for alleged violation of EU state aid rules.
Dresdner Bank yesterday admitted to $1.4bn in US sub-prime exposure, but said it was well cushioned by business at home. Germany's Union Investment has had to freeze redemptions from an $1.1bn fund invested in sub-prime loans, and even the Pharmacist and Doctors' Bank admitted $115bn in exposure.In France, Oddo & Cie is to close three funds making huge losses in sub-prime CDOs, saying it had been "caught out by the sub-prime dilemma". Insurance group AXA has closed two funds hit by the credit turmoil after a rash of redemptions in July.
In the USA - from bad to worse
The sub prime lending fiasco is a slow burning fuse. How long it is and how far it will reach, no one can be sure. Here's the latest casualty:
In a move that sent shockwaves through the financial markets and left investors millions of dollars poorer, Melville-based American Home Mortgage Investment Corp. announced yesterday that it lacked the money to pay its lenders or the credit lines to pay its borrowers. It was the largest mortgage bank to face bankruptcy in a year of bad news for the mortgage industry.
The effects of American Home's insolvency are far-reaching. The company's 7,627 employees -- including about 1,460 in Melville -- face an uncertain future. Its borrowers will lose access to $800 million in approved loans. That number is mounting by hundreds of millions of dollars each day. Major investors have announced millions in losses on the company. Banks that lent the company billions of dollars could see their stakes dissolve.
And Michael Strauss, the hard-driving entrepreneur who built American Home from a home-office operation into a top-10 mortgage bank, remaining its principal stakeholder throughout, lost $42.8 million in 20 minutes when the stock was marked sharply lower. The announcement contained shreds of the specific information that anxious investors and analysts had been clamouring for since the company kicked off a spate of ominous announcements on 6 April with a downward adjustment of first-quarter profit projections and dividend policy.
The company's executive vice president and chief investment officer Thomas McDonagh, who was paid more than $1.8 million in total compensation in 2006, had resigned only one day earlier. The company has acknowledged what many had feared: It had lost access to its credit facilities, lenders had been demanding repayment of some of American Home's debts for three weeks, and there were "substantial" additional calls for repayment outstanding.
The company said it had retained outside consultants -- companies that have assisted bankrupt mortgage firms in the past -- to help it resolve the situation in the manner "least disruptive to its business and to the many thousands of home buyers to whom it has committed mortgages." One option, the company said, was "the orderly liquidation of its assets."
Philadelphia-based RAIT Financial Trust, a publicly-traded investment pool, issued a release acknowledging that a 2005 financing line to AHM exposed its shareholders to $95 million in losses.
BY DANIEL WAGNER mailto:daniel.wagner@newsday.com?subject=Newsday.com%20Article
8:00 PM EDT, July 31, 2007
In a move that sent shockwaves through the financial markets and left investors millions of dollars poorer, Melville-based American Home Mortgage Investment Corp. announced yesterday that it lacked the money to pay its lenders or the credit lines to pay its borrowers. It was the largest mortgage bank to face bankruptcy in a year of bad news for the mortgage industry.
The effects of American Home's insolvency are far-reaching. The company's 7,627 employees -- including about 1,460 in Melville -- face an uncertain future. Its borrowers will lose access to $800 million in approved loans. That number is mounting by hundreds of millions of dollars each day. Major investors have announced millions in losses on the company. Banks that lent the company billions of dollars could see their stakes dissolve.
And Michael Strauss, the hard-driving entrepreneur who built American Home from a home-office operation into a top-10 mortgage bank, remaining its principal stakeholder throughout, lost $42.8 million in 20 minutes when the stock was marked sharply lower. The announcement contained shreds of the specific information that anxious investors and analysts had been clamouring for since the company kicked off a spate of ominous announcements on 6 April with a downward adjustment of first-quarter profit projections and dividend policy.
The company's executive vice president and chief investment officer Thomas McDonagh, who was paid more than $1.8 million in total compensation in 2006, had resigned only one day earlier. The company has acknowledged what many had feared: It had lost access to its credit facilities, lenders had been demanding repayment of some of American Home's debts for three weeks, and there were "substantial" additional calls for repayment outstanding.
The company said it had retained outside consultants -- companies that have assisted bankrupt mortgage firms in the past -- to help it resolve the situation in the manner "least disruptive to its business and to the many thousands of home buyers to whom it has committed mortgages." One option, the company said, was "the orderly liquidation of its assets."
Philadelphia-based RAIT Financial Trust, a publicly-traded investment pool, issued a release acknowledging that a 2005 financing line to AHM exposed its shareholders to $95 million in losses.
BY DANIEL WAGNER mailto:daniel.wagner@newsday.com?subject=Newsday.com%20Article
8:00 PM EDT, July 31, 2007
UK property looking grim - subprime is spreading!
Angela Balakrishnan
Saturday August 4, 2007The Guardian
The prospect of a mortgage debt crisis loomed yesterday after the number of home repossessions in the UK soared by 30% to an eight-year high as households struggled to keep up with mortgage payments in the face of higher interest rates. With the Bank of England expected to increase borrowing costs again before the end of the year, analysts warned that repossessions could surge even further. The first half of this year saw 14,000 properties repossessed, a 30% rise on a year ago, the Council of Mortgage Lenders said. This is the highest level since 1999 and equivalent to about 77 homes a day.
The unexpected jump was blamed on an increase in lending to borrowers with a poor credit history in the so-called "sub-prime" mortgage sector. Interest rates, which have risen five times in under a year to 5.75%, were also a big driving force in rising debt and missed mortgage payments. Economists cautioned that the impact of the recent rate increases was yet to be felt and homeowners would not be able to rely on rapid rises in the value of their homes as the housing market cools. "With the housing market slowing into 2008 and interest rates expected to hit 6%, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble," said David Stubbs at the Royal Institution of Chartered Surveyors.
Nearly 2 million homeowners will be coming out of fixed-rate mortgage deals in the next 18 months and find themselves having to renegotiate terms with interest rates 1.25 percentage points higher. The CML said that 125,100 homeowners had mortgage arrears of three months or more, 4% higher than the six months to the end of December, but 3% lower than for the first half of 2006. The housing charity Shelter criticised irresponsible lending to people who could not afford the repayments. The Liberal Democrat Treasury spokesman Vince Cable said borrowers needed to be fully aware of the risks.
Pat Boyden at PricewaterhouseCoopers said while it appeared people were switching from unsecured loans to mortgage debt, households may return to credit card debt in the future to make up for shortfalls in their income against a backdrop of higher inflation in recent months and modest growth in wages.
Saturday August 4, 2007The Guardian
The prospect of a mortgage debt crisis loomed yesterday after the number of home repossessions in the UK soared by 30% to an eight-year high as households struggled to keep up with mortgage payments in the face of higher interest rates. With the Bank of England expected to increase borrowing costs again before the end of the year, analysts warned that repossessions could surge even further. The first half of this year saw 14,000 properties repossessed, a 30% rise on a year ago, the Council of Mortgage Lenders said. This is the highest level since 1999 and equivalent to about 77 homes a day.
The unexpected jump was blamed on an increase in lending to borrowers with a poor credit history in the so-called "sub-prime" mortgage sector. Interest rates, which have risen five times in under a year to 5.75%, were also a big driving force in rising debt and missed mortgage payments. Economists cautioned that the impact of the recent rate increases was yet to be felt and homeowners would not be able to rely on rapid rises in the value of their homes as the housing market cools. "With the housing market slowing into 2008 and interest rates expected to hit 6%, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble," said David Stubbs at the Royal Institution of Chartered Surveyors.
Nearly 2 million homeowners will be coming out of fixed-rate mortgage deals in the next 18 months and find themselves having to renegotiate terms with interest rates 1.25 percentage points higher. The CML said that 125,100 homeowners had mortgage arrears of three months or more, 4% higher than the six months to the end of December, but 3% lower than for the first half of 2006. The housing charity Shelter criticised irresponsible lending to people who could not afford the repayments. The Liberal Democrat Treasury spokesman Vince Cable said borrowers needed to be fully aware of the risks.
Pat Boyden at PricewaterhouseCoopers said while it appeared people were switching from unsecured loans to mortgage debt, households may return to credit card debt in the future to make up for shortfalls in their income against a backdrop of higher inflation in recent months and modest growth in wages.
Tuesday, 7 August 2007
RBNZ intervention numbers out
Figures released today show the RBNZ sold a net NZD702 mln in June. The first intervention (officially confirmed) was on 11 June when the NZD/USD was at 0.7620, with other unconfirmed interventions happening in June and July at various higher levels.
Given that the NZD/USD is currently at nearly two month lows of 0.7570, I would say, at this point anyway, the RBNZ is ahead of the game!
Given that the NZD/USD is currently at nearly two month lows of 0.7570, I would say, at this point anyway, the RBNZ is ahead of the game!
Saturday, 4 August 2007
Excuse me, but Hodgson - we've got a problem
I don't often agree with Jim Hopkins stuff, but this is so worth it.
By Jim Hopkins
An open letter to ... Mr Pete Hodgson, Minister of Health, Wellington and ... Mr Steve Maharey, Minister of Social Development, Wellington.
Gentlemen,
The truly amazing thing is not the silliness of the idea - that's probably par for the bureaucratic course - but rather the breathless enthusiasm with which you have announced it.
Now, to be fair, you chaps undoubtedly know much we humble folk don't, but we are nevertheless gobsmacked - assuming Sue Bradford will permit it - by your apparent conviction that the best answer to an awful problem is ... the compulsory introduction of a perfunctory hospital questionnaire.
Our heads are being scratched, sirs. Especially since none of the three questions you've decreed that nurses must ask includes the word "children". This makes many of us very confused.
If you'll permit the discourtesy, Hodgson, we've got a problem. And this is it. Some people treat their children in a revolting and disgusting way. That is the problem. Some people inflict pain on their children. Pain that makes us weak - and weep - when we imagine it.
Some people beat their children; with fists, wood, tools, jug cords, or all of the above. Some people torture their children. Some people see fit to punish their children by putting them in a clothesdryer.
When we hear that, sirs, our reaction is simple. And so is our solution. We would put anyone who does that into a clothesdryer themselves. And we would leave them there for a month. Please understand this, Mr Hodgson - and you too, Mr Maharey. We want such cruelty to be punished. Yes, gentlemen. Punished. Look, we know that "punish" is not a word that comes easily to the ministerial tongue but that is what we want. And we want you to want it too.
More to the point, we want an immediate end to all the inducements and all the incentives that are available to those who visit hideous harm on children. We want all the well-intentioned but shamefully administered unconditional taxpayer-funded assistance stopped! Immediately.We don't want our government - through the neglect of its agencies - implicated any longer in the violation and murder of innocents.
Gentlemen, you can do this. You needn't wait for the Mayor of Rotorua to suggest that some conditions might possibly apply to the payment of benefits before saying, "Gosh, that's a good idea!"
Find a mirror, Mr Hodgson - and Mr Maharey - then say to yourself as you gaze in the glass, "I can do that myself!"
Because you can!
We do not want any more stories about people popping into McDonald's before, finally, delivering their brain-damaged twins to hospital.
We do not want any more reports of famished children locked outside in the rain and driven to scavenge in neighbours' rubbish bins while their parents watch TV in a warm, bright house. (You may have forgotten that one but check your files, it'll be there.) Well, not any more! That's our message. Stop it. Now. Do everything you can to end this ugliness. And that includes accepting unintentional complicity.
See, we're not silly. We may not be clever - as you are - but we're not silly. We can read. We can listen. We can watch TV. And we're literally sick and tired of discovering, time and again, that our taxes (and your employees) are implicated in these shameful deeds.
So be brave, gentlemen. Tell your 25-year-old senior policy analysts that asking an 80-year-old lady who's spent two years waiting for a hip replacement if she feels "controlled or always criticised" won't fix the problem. Tell them that asking a nun admitted with a heart murmur if she's been "asked to do anything sexual that you didn't want to do" won't save the life of a single child. Tell them, if they want to spend $11 million preventing domestic violence, not to waste it on questionnaires, but post it as rewards for any information that might spare a child and convict its abuser.
Better still, tell them to write a speech explaining why the Government is no longer willing to ladle out cash and neglect in equal quantities. Tell them you want everyone to know why benefits - like wages - will henceforth come with conditions attached.
Tell them to find a nice way of expressing this old and inescapable truth: "We've all got to sing for our supper" and precisely how this will apply to those being paid by the state to care for a child.
Spell out the terms and conditions of the contract clearly and unambiguously and then spell out the consequences if they are ignored. That's what we want, gentlemen.
You see, sirs, when all's said and nothing's done, the national scandal described in this week's headlines is not that adults are beating children. That is a personal disgrace.
The national scandal is that your government, our government, is all too often a party to the outrage. But it's not doing an effective thing about it.
So here are your three questions, gentlemen: Do you care? Will you do anything worthwhile?
When?
Now that didn't cost $11 million, did it?
Yours sincerely,
By Jim Hopkins
An open letter to ... Mr Pete Hodgson, Minister of Health, Wellington and ... Mr Steve Maharey, Minister of Social Development, Wellington.
Gentlemen,
The truly amazing thing is not the silliness of the idea - that's probably par for the bureaucratic course - but rather the breathless enthusiasm with which you have announced it.
Now, to be fair, you chaps undoubtedly know much we humble folk don't, but we are nevertheless gobsmacked - assuming Sue Bradford will permit it - by your apparent conviction that the best answer to an awful problem is ... the compulsory introduction of a perfunctory hospital questionnaire.
Our heads are being scratched, sirs. Especially since none of the three questions you've decreed that nurses must ask includes the word "children". This makes many of us very confused.
If you'll permit the discourtesy, Hodgson, we've got a problem. And this is it. Some people treat their children in a revolting and disgusting way. That is the problem. Some people inflict pain on their children. Pain that makes us weak - and weep - when we imagine it.
Some people beat their children; with fists, wood, tools, jug cords, or all of the above. Some people torture their children. Some people see fit to punish their children by putting them in a clothesdryer.
When we hear that, sirs, our reaction is simple. And so is our solution. We would put anyone who does that into a clothesdryer themselves. And we would leave them there for a month. Please understand this, Mr Hodgson - and you too, Mr Maharey. We want such cruelty to be punished. Yes, gentlemen. Punished. Look, we know that "punish" is not a word that comes easily to the ministerial tongue but that is what we want. And we want you to want it too.
More to the point, we want an immediate end to all the inducements and all the incentives that are available to those who visit hideous harm on children. We want all the well-intentioned but shamefully administered unconditional taxpayer-funded assistance stopped! Immediately.We don't want our government - through the neglect of its agencies - implicated any longer in the violation and murder of innocents.
Gentlemen, you can do this. You needn't wait for the Mayor of Rotorua to suggest that some conditions might possibly apply to the payment of benefits before saying, "Gosh, that's a good idea!"
Find a mirror, Mr Hodgson - and Mr Maharey - then say to yourself as you gaze in the glass, "I can do that myself!"
Because you can!
We do not want any more stories about people popping into McDonald's before, finally, delivering their brain-damaged twins to hospital.
We do not want any more reports of famished children locked outside in the rain and driven to scavenge in neighbours' rubbish bins while their parents watch TV in a warm, bright house. (You may have forgotten that one but check your files, it'll be there.) Well, not any more! That's our message. Stop it. Now. Do everything you can to end this ugliness. And that includes accepting unintentional complicity.
See, we're not silly. We may not be clever - as you are - but we're not silly. We can read. We can listen. We can watch TV. And we're literally sick and tired of discovering, time and again, that our taxes (and your employees) are implicated in these shameful deeds.
So be brave, gentlemen. Tell your 25-year-old senior policy analysts that asking an 80-year-old lady who's spent two years waiting for a hip replacement if she feels "controlled or always criticised" won't fix the problem. Tell them that asking a nun admitted with a heart murmur if she's been "asked to do anything sexual that you didn't want to do" won't save the life of a single child. Tell them, if they want to spend $11 million preventing domestic violence, not to waste it on questionnaires, but post it as rewards for any information that might spare a child and convict its abuser.
Better still, tell them to write a speech explaining why the Government is no longer willing to ladle out cash and neglect in equal quantities. Tell them you want everyone to know why benefits - like wages - will henceforth come with conditions attached.
Tell them to find a nice way of expressing this old and inescapable truth: "We've all got to sing for our supper" and precisely how this will apply to those being paid by the state to care for a child.
Spell out the terms and conditions of the contract clearly and unambiguously and then spell out the consequences if they are ignored. That's what we want, gentlemen.
You see, sirs, when all's said and nothing's done, the national scandal described in this week's headlines is not that adults are beating children. That is a personal disgrace.
The national scandal is that your government, our government, is all too often a party to the outrage. But it's not doing an effective thing about it.
So here are your three questions, gentlemen: Do you care? Will you do anything worthwhile?
When?
Now that didn't cost $11 million, did it?
Yours sincerely,
A Citizen.
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