Tuesday October 18, 2005 - 22:46:51 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: NZD crosses firm as Uridashi issuance continues
Despite a sharp appreciation of the USD against other major currencies during the local session, NZD/USD traded within a familiar range of 0.6940-0.6971 yesterday. This resilience against the USD, however, has seen the Kiwi appreciate markedly on the crosses and the 80 level against the Yen and 0.9300 level against the AUD were easily surpassed yesterday. Uridashi issue remains the topic of focus, with a total of NZD 2.5b in new issuance coming to the market so far this month. This compares with AUD Uridashi redemption of AUD 1.7b. Further, the World Bank reiterated in an interview with Dow Jones yesterday, that demand for NZD denominated paper remains strong and that additional issuance is in the pipelineZealand
Australian Dollar: AUD pressured by USD gains
Despite USD/JPY trading to two-year highs above 115, AUD/USD losses were moderate in the face of a surging USD during the local session yesterday. While the AUD remains pressured against the Kiwi, an AUD/USD range of 0.7473 - 0.7495 was seen locally. The currency came under further pressure during overnight trade, with a higher-thanexpected Producer Price Index and robust TIC data further fuelling USD gains.
Major Currencies: Inflation, capital inflow support US dollar
US producer price index data indicated a jump in inflation pressures across the board in Sept and, combined with more impressive capital inflow into the US, bolstered support for the dollar. Foreign investment in US securities showed there was no problem with funding the current account deficit, and with the Fed's interest rate tightening cycle to continue yesterday's data assisted a USD rally. The USD strengthened against all major currencies bar the Canadian dollar on Tuesday. USD/CAD initially weakened due to the US dollar positive data but was given a reprieve late in the day due to an interest rate rise and a hawkish accompanying statement. The euro weakened from the high at 1.2018 and drifted lower throughout the day. The low traded at 1.1915; solid support is evident in the low 1.1900's where central bank buying pushed the euro up to 1.1950 at the close. The USD strengthened to a 25-month high against the yen at 115.92 and closed a touch lower around 115.60.
US producer prices jump 1.9% in Sept.
The PPI report revealed increasing price pressures at all stages of production. Factory gate prices posted their steepest one month gain since early 1990, reflecting a 12.7% surge in gasoline and a 1.4% jump in food prices. The core rate bounced 0.3% in Sept following August's flat outcome, with new auto prices jumping 0.9% and capital goods prices up 0.3% (both these followed falls in Aug).
The US Treasury International Capital report
showed another punchy result for Aug, easily over-financing the current account deficit for another month, although the $91bn inflow was flattered by a record liquidation of US held foreign bonds.
The Bank of Canada lifted rates a further 25bp to 3.0%
last night. In the statement, the Bank said: "given that the Canadian economy now appears to be operating at capacity, some further reduction of monetary stimulus will be required... to keep inflation on target. However, with the risks to the global outlook tilted to the downside, the Bank will monitor international developments particularly closely." This is more hawkish than the previous statement on September 7.
The ZEW survey for Germany
posted the barest of rebounds in October, rising just 0.8 pts to 39.4, after falling more than 10 pts in September. Euroland inflation was revised a touch higher to 2.6% yr from the flash estimate but the core inflation measure held at the four year low of 1.3% yr for the third month running.
The UK CPI edged up in Sept to 2.5% yr,
it's highest since late 1996, and 0.5 pts above target. However fears of a more dramatic spike, and renewed acceleration in the core rate (steady at 1.7% yr), proved unfounded.
Country Release Last Forecast
Aust Aug Westpac-MI Leading Index 4.7% n/f
US Sep Housing Starts -1.3 2.0
Sep Housing Permits -1.5 1.0
Fed Beige Book
Fedspeak: Pianalto, Geithner
Eur Aug Industrial Production 0.2% -0.2%
UK Oct BoE Meeting Minutes
Can Aug Wholesale Sales -0.5% 1.0%
Latest Research papers/Publication
NZ Economic Overview October 2005 (18 October)
NZ Q3 CPI Review (17 October)
NZ Weekly Forex Outlook (17 October)
NZ Weekly Interest Rate Wrap-up (17 October)
OCR hike implicitly endorsed (14 October)
NZ Q3 CPI Preview (12 October)
NZ Q3 QSBO Review and OCR Outlook (11 October)
NZ Weekly Forex Outlook (10 October)
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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