Thursday November 3, 2005 - 00:29:33 GMT
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Westpac Institutional Bank - www.westpac.co.nz
Forex: Westpac Institutional Bank Morning ReportNew Zealand Dollar: Dwellings fall but Fed rates rise
The NZD continued its trek lower towards a two-week low against the USD after September dwelling consents fell marginally, and the Federal Reserve raised rates and signaled it was still on a tightening bias yesterday. The NZD also came under pressure during the local session when Governor Bollard reiterated recent comments that he expected the currency to fall and that that would increase short-term inflation pressures. The currency stabilized somewhat overnight and opens around 0.6940 this morning.
Australian Dollar: Dwellings bounce but RBA holds
Dwelling consents pushed up 1.8% during September, but this was only a partial rebound following the 18% slump over the previous three months. More significantly yesterday was the AUD's decline against the USD after the RBA held rates steady just hours after the Fed lifted theirs. Both outcomes were expected and further erode the AUD's yield advantage over the USD. The currency hit an overnight low of 0.7398 and opens today at 0.7430.
Major Currencies: USD retreats vs euro on hawkish ECB talk
The USD extended losses against major European currencies, weighed down by speculation the ECB would be more hawkish at Thursday's monetary policy meeting. The USD earlier rose to a 25-month high against the yen at 116.98 following the Fed's interest rate hike yesterday. The euro climbed as high as 1.2085 against the dollar boosted by a larger than expected drop in German unemployment, however the main focus of the session was speculation that the ECB could raise rates for the first time in 5 years in December. The yen on the other hand weakened on interest-rate differentials.
Japanese base money up 2.8% in Oct.
This was above expectations and quite a bit above the Sep outcome of 1.7%. Implicit in the BoJ criteria for normalising monetary policy is the return of a recognisable transmission mechanism from narrow to broad money. In other words, credit creation by financial intermediaries must begin to operate, due to positive loan growth. Despite the hooplah associated with near zero inflation, loan growth is negative and capex is being funded well within cashflow constraints. We emphasise that a zero interest rate policy exit is a distant prospect, even if a QE reduction is not.
No US data to report.
UK construction PMI falls from 57.2 to 53.9 in Oct.
Quite a steep decline, and a little at odds with other signs of a UK housing market revival.
Norwegian central bank tightens 25bp to 2.25%.
However the bank reiterated its intention to move in "small, not to frequent steps". The previous move, the first in the current upcycle, was in June.
Country Release Last Forecast
Aust Oct AIG PSI 54.5 n/f
Sep Trade Balance AUDbn -1.6 -1.35
Sep Retail Trade 0.6% 0.1%
Q3 Real Retail Trade 0.2% 0.8%
US Q3 Productivity 1.8% 2.5%
Initial Jobless Claims w/e 29/10 328k 315k
Oct ISM Non-Manufacturing 53.3 60.0
Sep Factory Orders 2.5% -1.0%
Eur ECB Repo Rate Decision 2.0% 2.0%
UK Oct PMI Services 55.0 55.5
Latest Research papers/Publication
NZ Weekly Interest Rate Wrap-up (1 November)
NZ Weekly Forex Outlook (31 October)
RBNZ October OCR Review (27 October)
NZ Weekly Forex Outlook (25 October)
NZ Weekly Interest Rate Wrap-up (25 October)
RBNZ October OCR Preview (19 October)
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)
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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