How can the NZD get higher?

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Geektastic

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#1353204 28-Jul-2015 10:49

Fred99:
Geektastic:
Fred99: Old saying - "buy on the rumour - sell on the news".
Future expected shifts in the OCR are mainly already reflected in the present exchange rate.
The OCR isn't supposed to be adjusted to control the exchange rate - only to adjust for inflation. But of course that's what happens anyway, as well as actual adjustments, there's "talking down" the rate - to which the markets respond immediately.
The last two quarters, CPI inflation in NZ was 0.1 and 0.3% - lowest since the 1940s.

Lowering the OCR rate is supposed to get us spending - stimulating the economy. Of course we all know where most that extra spending would go - into a non-productive bubble, and worse, using money borrowed offshore.

The other thing is that we are competing with (amongst others) places like the USA and EU. Their businesses are borrowing at close to 0% OCR which gives them an advantage. Also, at least in the case of the USA, fuel is so much cheaper than NZ that the cost of manufacturing and shipping is a fraction of ours.

Cutting our fuel costs by 50% would do at least as much for the economy than tinkering with the OCR I suspect.

Oh - it's worse than that. The US and EU also subsidise the crap out of production of the very commodities which are our primary exports, and will not change that in a TPP - or other deal.

I'm of the opinion that if commodities don't recover very soon, then NZ is going to need direct government intervention/stimulus - or we're heading for a possible "depression" creating event (negative inflation and negative GDP growth). I feel that's why government is reluctant to address the housing bubble - as at least while the bubble continues to expand, then it's countering negative sentiment.

Less so to some extent. For example, the EU milk quota system has recently been abandoned, flooding all their surplus product onto the world market and...increased supply has driven down prices.

However this should have been predicted by the agribusiness consultants in NZ ages ago and prepared for, just as they should be preparing for the increase in supply when 1 billion Chinese people work out how to produce their own milk and sell the surplus rather than buying ours....

Jas777

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#1353472 28-Jul-2015 15:00

Many factors bringing down the NZ dollar:

Low Inflation.
Slow down of rebuild.
Chinese economy slowing down.
World stockpiles of Milk.
Australian problems.
Greece.
Lower Interest rates.
Undervaluation of other world currencies.
Moving money back to the US because of preceived world problems.
etc.

Those that brought goods from the US had a nice wee period of high buying power, it is now reverting back to normal.

wellygary

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#1353509 28-Jul-2015 15:44

Jas777: Those that brought goods from the US had a nice wee period of high buying power, it is now reverting back to normal.

Somewhere between 60-70 is usually considered "fair" value for the NZD, but currencies usually spend most of their lives either above or below "fair value"

Although at the moment a fair chunk of the NZ Dollar "weakness" is actually partner currenty strength,(esp, USD and GBP)

Over the last 12 months, the NZD/USD cross has fallen about 25%, against the pound it's down 15%, the Yen about 10%, the Euro about 5%, But Against the Aust dollar over the past 12 months we have basically stayed static at ~90c
br>

Batman

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#1353546 28-Jul-2015 16:17

If you look at nzd against everyone else it's only dropped a little. It's just that the usd has gone up.

Why does dollar go up? Strong economy, high OCR. What makes strong economy? Umm don't ask me.

Why does dollar go down? Weak economy, low OCR. Or worse, printing money.

And in a stable system it goes up and down. So time will make it go up.

Fred99

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#1353598 28-Jul-2015 17:43

The relevant index is the NZD : TWI (trade weighted index)

Of course that shows a significant drop, but longer trend tells more - that the NZD is still perhaps a little high based on a 15 year moving average:

As far as guessing where it's going, don't ask me. I've been a commodity trader on international markets and hedging using currency futures - part of the deal which is needed to cover yourself. I learned quickly to not trust any opinion, not even your own. You trade on margin - and cover your backside. Clever dicks always try to beat it - and they'll always eventually lose - our PM excepted of course.
One thing that's proven, and that's if volatility is high on forex rates between trading partners, then it's very bad for trade volume. (Nobody wants to invest, hold stock etc - as risk is increased).

mattwnz

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#1353605 28-Jul-2015 17:58

wellygary:
Jas777: Those that brought goods from the US had a nice wee period of high buying power, it is now reverting back to normal.
Somewhere between 60-70 is usually considered "fair" value for the NZD, but currencies usually spend most of their lives either above or below "fair value"

Although at the moment a fair chunk of the NZ Dollar "weakness" is actually partner currenty strength,(esp, USD and GBP)

Over the last 12 months, the NZD/USD cross has fallen about 25%, against the pound it's down 15%, the Yen about 10%, the Euro about 5%, But Against the Aust dollar over the past 12 months we have basically stayed static at ~90c
br>

I believe I have heard experts saying the 50-60 is where the NZ dollar should be. But 50% of these experts say one thing, and the other 50% say the opposite. But early 2000's it was in the 40's, and it wasn't that long ago when people were talking about parity with the USD.

Batman

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#1353606 28-Jul-2015 18:04

Do you have a crystal ball? If not you won't predict anything.

Does the weatherman have a crystal ball? No. If so then they say rain, well it either will or it won't.

Does the economist have a crystal ball? No. They have to say something as they get paid to say something. I've followed Tony Alexander's email since 2007. Since then he's always predicted fixed mortgage interest rates rise. It's now 2015. I'm still waiting.

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Batman

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#1353612 28-Jul-2015 18:10

mattwnz:
wellygary:
Jas777: Those that brought goods from the US had a nice wee period of high buying power, it is now reverting back to normal.
Somewhere between 60-70 is usually considered "fair" value for the NZD, but currencies usually spend most of their lives either above or below "fair value"

Although at the moment a fair chunk of the NZ Dollar "weakness" is actually partner currenty strength,(esp, USD and GBP)

Over the last 12 months, the NZD/USD cross has fallen about 25%, against the pound it's down 15%, the Yen about 10%, the Euro about 5%, But Against the Aust dollar over the past 12 months we have basically stayed static at ~90c
br>

I believe I have heard experts saying the 50-60 is where the NZ dollar should be. But 50% of these experts say one thing, and the other 50% say the opposite. But early 2000's it was in the 40's, and it wasn't that long ago when people were talking about parity with the USD.

Easy. When experts say the opposite, it means nobody knows.

mattwnz

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#1353613 28-Jul-2015 18:11

joker97: Do you have a crystal ball? If not you won't predict anything.

Does the weatherman have a crystal ball? No. If so then they say rain, well it either will or it won't.

Does the economist have a crystal ball? No. They have to say something as they get paid to say something. I've followed Tony Alexander's email since 2007. Since then he's always predicted fixed mortgage interest rates rise. It's now 2015. I'm still waiting.

Although the media needs to go somewhere to get some predictions. I guess these so called experts are paid big bucks to know something, otherwise they are a waste of space.

Batman

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#1353615 28-Jul-2015 18:15

You mean experts like this one

http://www.nydailynews.com/news/world/malaysia-recruits-witch-doctors-find-missing-passenger-jet-article-1.1720770

Batman

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#1353631 28-Jul-2015 18:28

Fred99: The relevant index is the NZD : TWI (trade weighted index)

Of course that shows a significant drop, but longer trend tells more - that the NZD is still perhaps a little high based on a 15 year moving average:

As far as guessing where it's going, don't ask me. I've been a commodity trader on international markets and hedging using currency futures - part of the deal which is needed to cover yourself. I learned quickly to not trust any opinion, not even your own. You trade on margin - and cover your backside. Clever dicks always try to beat it - and they'll always eventually lose - our PM excepted of course.
One thing that's proven, and that's if volatility is high on forex rates between trading partners, then it's very bad for trade volume. (Nobody wants to invest, hold stock etc - as risk is increased).

i am not sure if economics can be predicted based in history. if that is so, NY, Sydney, HK, Singapore, London, Auckland house prices should fall by around 30-50% after adjustment for inflation (900-1800% without adjustment); and Greece will be just fine. anyway I know nothing about economics other than Tony Alexander's prediction which I'm still waiting for. Luckily I never fixed anything and never listened.

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