Friday October 14, 2005 - 00:31:58 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD slides as USD/JPY eyes 115
The NZD was pressured from an early high of 0.6978 during the local session yesterday. Broadbased USD strength saw the market eye key 17-month highs against the yen above 115, further weighing on local currencies. The NZD losses deepened to 0.6938 over the afternoon as negative AUD sentiment spilled over onto the NZD, following the release of disappointing Aust employment data. The offshore session saw the NZD slide further, as better than expected US trade data exacerbated the greenback's recent run. The currency slipped below 0.6900 to an overnight low of 0.6883, before recovering to 0.6920, from where we open this morning.
Australian Dollar: September job losses hit AUD
From an early intraday high of 0.7559, the AUD suffered sharp losses during the domestic session yesterday. The release of Sep's employment data showed a loss of 42,000 jobs, the first decline in a year and this was reflected in up-tick in the unemployment rate from 5.0% to 5.1%. An already soft AUD suffered further losses with intraday lows established at 0.7495. These losses deepened overnight, with a surge in US import prices reinforcing the case for further US rate rises. The AUD slumped to an overnight low of 0.7462, before recovering to open this morning at 0.7500.
Major Currencies: Dollar posts sharp gains, relieved by US trade data
The USD rose on Thursday, reaching a two-year high of 115.10 against the yen, as an oil-driven surge in import prices added to speculation the Fed will keep raising rates to fight inflation. The US Aug trade deficit widened to $59.0bn but was slightly below a median $59.5bn estimated by economists making it the third largest on record. The euro initially fell as low as 1.1914 before recovering ground after the ECB chief economist Otmar Issing stated that risks of inflation in the euro zone staying above 2% next year have increased. The euro opens this morning around 1.2015. USD buying against the yen dried up after option barriers were triggered above 115.0 as speculators locked in profit. JPY opens this morning around 114.48.
Japan's Aug current account surplus narrowed to ₯1292bn.
The main source of the narrowing was the trade balance. At the risk of repeating ourselves, at these sort of levels the current account should be very constructive for the yen.
US trade deficit widens $1bn to $59bn in Aug.
Export volumes rose sharply, buoyed in part by Boeing aircraft sales, which may well be sustainable given the strength of civilian aircraft orders this year. Capital goods, semi-conductors and automotive exports were also strong. Imports rose as well, largely a function of the oil price.
US import prices surged 2.3% in Sep.
As well as the 7.3% surge in petroleum prices which lifted imports prices sharply last month, nonpetroleum import prices, such as for Canadian natural gas, jumped a very steep 1.2%. Excluding all fuel, the rise was still 0.4%, hinting at the prospect of upside surprises in the September CPI (tonight).
The Canadian trade surplus jumped by C$700mn to C$5.6bn in Aug,
but the downward revision to July was worth $200mn more than that so the overall message from the report was negative for the C$, which sold off sharply last night.
Euroland Q2 GDP growth was unrevised at 0.3%,
but the growth rates of the various components of domestic demand were revised a little higher, which is modestly positive.
Otmar Issing, ECB chief economist,
claimed there were "reasons for concern" about second round inflationary pressures flowing from higher energy prices, but "no evidence of them yet". ECB Council member Garganas said that if inflation failed to head back below 2% next year, there would be grounds for the ECB to act. Issing said the risk that inflation was above 2% next year "has surely increased". All this confirms that the ECB has a wary tightening bias.
Country Release Last Forecast
NZ Aug Retail Trade 1.8% -0.1%
US Sep CPI/Core 0.5%/0.1% 1.0%/0.3%
Sep Retail Sales/Ex Auto -2.1%/1.0% -0.2%/0.2%
Sep Industrial Production 0.1% -1.0%
Oct UoM Consumer Sentiment (Prelim) 76.9 82.0
Aug Business Inventories -0.5% flat
Jpn Sep Corporate Goods Prices %yr 1.7% 1.7%
Can Aug Manufacturing Shipments -1.4% 1.8%
Aug New Motor Vehicle Sales 7.3% -6.0%
Latest Research papers/Publication
NZ Q3 CPI Preview (12 October)
NZ Q3 QSBO Review and OCR Outlook (11 October)
NZ Weekly Forex Outlook (10 October)
NZ Weekly Interest Rate Wrap-up (10 October)
NZ Q3 Employment Confidence Index (5 October)
NZ Weekly Forex Outlook (3 October)
NZ Weekly Interest Rate Wrap-up (3 October)
Economics vs sentiment (29 September)
These papers/publications are available on Online Research on
Westpac Institutional Banks website (www.wib.westpac.co.nz)
Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 24 May 2005. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.
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