Quote:
quote:RBNZ puts the death knell on the Kiwi, we think we have seen the last rate hike in their cycle now.
Craig Ferguson, Senior Currency Strategist ANZ
Well, we wrote in last night’s report that the fate of the Kiwi lay in the RBNZ’s hands. Our motto is “never bet against the RBA”, and in this sense, we can extend that concept to the NZ context, and now state that we also “should never bet against the RBNZ”. One reason for this is that they own the monetary policy stick, and can often use it to follow up any public comments they make. We didn’t really consider last night the outcome for the NZD if the RBNZ hiked and then were dovish, as we really didn’t think they were overly concerned as yet that NZ GDP growth was decelerating fast enough to offset inflationary pressures. However you can see what the market’s reaction to that dovishness means for the NZD in the price action this morning.
The feature of their statement accompanying their policy hike this morning was the more dovish tone, the balance now between domestic growth and inflation risks as dictators of future rate hikes, and the rising risks of a possible hard landing. No reference was made, as in the last statement, that further rate hikes would be likely, and while the RBNZ said that at this stage no easing prospect is foreseeable, we believe that NZ rates will be around 5.5% in 2007 as the easing cycle, when it comes, will be extremely aggressive.
The implications are pretty clear for the currency. The RBNZ have used the policy stick to provide the death knell for the NZDUSD and NZDAUD rates. Thankfully we suggested last night that shorts should be entered in NZD around .71 cents. We believe those shorts should be kept and added to, as the next stop for NZDUSD is .6650 and then much lower levels.
At least somebody agrees with me:D:D