Welcome to the Pure FX account of the latest changes in the foreign exchange rates.
This is intended as a brief guide to movements in the exchange rates overnight, to put you in the best position for when you change currencies.
New Zealand Dollar
What do you do if international investors keep piling cash into your currency, and its hurting your economy? Well, if you’re the Swiss National Bank, you peg the franc against the euro, to prevent exports getting too expensive. But if you’re New Zealand prime minister John Keys, you let loose with a whole range of comments designed to pull the NZ dollar down.
Last night, the kiwi dollar shed two cents against the pound, as Mr. Keys speculated that interest rates should be cut in New Zealand, to prevent the NZ dollar climbing too high. He highlighted that a strong dollar would hurt New Zealand, given that it’s an island nation heavily dependent on exports to thrive, especially in agriculture.
Of course, the Reserve Bank of New Zealand is independent of government, and Mr. Keys cannot directly intervene to cut interest rates. Yet this makes his comments all the more serious, and will be seen as indicative of his desire to push the kiwi dollar down.
What’s coming up next?
Will the prime minister succeed? Well, given the dismal outlook in Europe and the US at the moment, New Zealand and Australia make for comparatively safe investments today. As Tim Kelleher, head of institutional FX at ASB, notes, the NZ and Aussie dollars are “safe havens at the moment.” Hence, it is quite possible the kiwi dollar could soon rise again, to the ire of John Keys.
Elsewhere, the pound could encounter some choppy waters today, as the Bank of England unveils its Quarterly Inflation Forecast. Herein, the central bank is heavily tipped to cut its 2012 growth forecast to 0.0%, down from 0.8% just three months ago.
This would reflect the fact that, in the intervening three months, the UK contracted a shock –0.7% in the second quarter, while economic output continued to drag. As Howard Archer, chief UK and European economist at IHS Global Insight, notes, Britain “currently faces a worrying and uncertain outlook.” Hence the potential for the pound to fall.
What’s coming up next?
Tomorrow, the latest monthly trade balance for the UK is released. If this reveals the UK shrank its deficit, particularly by exporting to emerging markets outside the Eurozone, it could give the pound a shot in the arm. Fortunately, there’s a good chance of this happening given that, in recent months, sales of British luxury cars such as Rolls Royce have shot up in places like China.
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