Thursday November 3, 2005 - 11:56:22 GMT
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Black Swan Capital - www.blackswantrading.com
“Speculation in the truest sense calls for anticipation.”
Richard D. Wyckoff
Reserve Bank of New Zealand Governor Allan Bollard said yesterday:
"We now see the exchange rate as exceptionally high, and in some respects this is unjustifiable...In time, it will fall. Investors who think that the New Zealand dollar only goes up will be set for disappointment."
Kiwi appears in nosebleed territory. With overnight rates around 7%, is there any better indication that it’s primarily about yield at the moment?
It’s Comdol neighbor—Mr. Aussie—is gasping for breath in the rarified air too! The Reserve Bank of Australia’s cash rate is 5.5%; not quite in Kiwi territory, but it ain’t too shabby, especially when the next move from the RBA is likely to be up—at least some time in early 2006.
Historically, the market has challenged central banks when they say “The currency is solid and speculators who think it will fall will be punished.” Does this mean the market will now drive the Kiwi higher, challenging RBNZ Gov. Ballard?
There is little to suggest rates are heading lower for the Comdol crowd—Canada included. So if Mr. Ballard was to intervene to push his currency lower AND it is still about yield, it might be a good time for a challenge—stay tuned.
Black Swan Capital
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