Winds of change affect Risk appetite of Kiwi

11:01 AEST, Wednesday 25 September 2013

Winds of change affect Risk appetite of Kiwi

By Andrew May (Sales Trader, CMC Markets New Zealand)

As Team New Zealand succumb to the awesome might of Oracle USA in the America’s cup finals, so in tow has the NZD retreated humbly against the Greenback. We open today an entire cent lower at US 0.8274 treading a brittle five month support with little to keep an ensuring push to the down side of 0.8215.

A myriad of factors are at play here but none more than a simple investor versus risk ‘Mexican standoff’. Traders are weary of the encroaching debt ceiling that the US Government will once again have to play out with republicans in Washington. Credit ratings agency Moody’s already firing a warning shot across the bow of the US threatening imminent downgrade potential.

At the same time US consumer confidence was down, albeit slightly but enough to ‘rattle’ already frayed nerves as US markets continue to succumb to either little or no gains after a super-charged ‘no taper call ’ last week, in which we saw risk appetite return heartily across the board.

Finally, as we’re in the last week and month of the quarter, expect to see traders continue to take a little more profit off the table as they reposition themselves for the Christmas quarter. Thus the general risk profiling across the globe will probably continue to shed gains – the Kiwi dollar over the short term will be among them.

In preventing further down side risk to the Kiwi however, NZ dairy mogul giant Fonterra upgraded its milk payout forecast for the 2013/14 season by 50c to $8.30kg equating roughly to an additional injection of NZD$900M to the NZ economy. The coming dairy revenue will provide significant support to the NZD as it further underpins NZ’s superior international growth differentials whilst providing ballast to sails of our trade balance and overall GDP.

ENDS

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