Rising NZD indicates different sort of traders

T

trading1

I do not believe that there's any fundamental cause for the NZD to rise so much recently. I think it's sort of like spillover from flows into the AUD. I'd suggest that it illustrates not the usual FX trading but money wanting to diversify away from elsewhere (Euro?) to the AUD and coming from a diversification mentality, more like funds & stock-traders. It all has the "scent" of a different kind of money flowing. Any comments welcome.
 
It, maybe could be many things but undervaluation is not one of them. It's not 'coming back' it's never floated anywhere near this level before ... ever
 
Quote from trading1:
It, maybe could be many things but undervaluation is not one of them. It's not 'coming back' it's never floated anywhere near this level before ... ever
More...
Are you sure about that? Looking at NZDUSD is not really a very meaningful way to think about the value of NZD. Current level of NZDUSD is mostly a function of the weakness of USD, rather than anything to do with NZD.

Based on a variety of my fair-value models, NZD was arnd 15% undervalued, vs for example AUD. It's quite a bit less undervalued now.

Moreover, if you look at NZD TWI, you'll be able to see what I mean (see attached).
 

Attachments

Yes, the real comparison is between the kiwi and aussie.

The kiwi didn't float to these levels vs the US ... the US sank ... stonelike.


So the kiwi has reacted to bad news and the aussie reacted to the "China will buy our minerals and make us all rich" story. Now we seem to have a correction in both stories and the trend seems to be back towards a more typical ratio ... or not :)
 
Quote from trading1:

It, maybe could be many things but undervaluation is not one of them. It's not 'coming back' it's never floated anywhere near this level before ... ever
More...

I can remember the days that it was valued higher than the USD and closer to the cable.
 
You must log in or register to reply here.
Back
Top