View Full Version : New Zealand Dollars
Anyone familiar with NZ? Their CB doesn't seem to be in the race to the bottom of their currency and their debt situation seems reasonable for a developed country. The CD's for the NZ$ at everbank have an apy of 6.22% for 6 month cd's.
thoughts?
The Outback Oracle
03-11-08, 01:19 AM
I can only say what I am doing DemonD and i have sold a substantial amount of NZD and bought Japanese Yen! Maybe Swiss francs might have been a better bet as per EJ and Fred. However that's my position. I have done the same for A$.
The retail situation in NZ will turn because of high interst rates and my contacts there suggest this is already starting. It will necessitate lower interst rates. At that time the air will come out of the NZD with either a loud hiss or a ginormous bang!
Now that is the way i am positioned. History would suggest an opposite stance could prove profitable!
I can only say what I am doing DemonD and i have sold a substantial amount of NZD and bought Japanese Yen! Maybe Swiss francs might have been a better bet as per EJ and Fred. However that's my position. I have done the same for A$.
The retail situation in NZ will turn because of high interst rates and my contacts there suggest this is already starting. It will necessitate lower interst rates. At that time the air will come out of the NZD with either a loud hiss or a ginormous bang!
Now that is the way i am positioned. History would suggest an opposite stance could prove profitable!
I concur with Outback.
You should have a look at this string on another thread that starts with a post by EJ here, for why...
http://www.itulip.com/forums/showthread.php?p=29772#poststop
Thailandnotes
03-11-08, 08:32 AM
I have invested some money very short term in NZ dollars. I have been there recently. I know people there and I know people in Thailand who have to pay bills in NZ, so they keep a close eye on things. Investment is still flooding into that country. Despite inflation, buying land and building a house are still relatively cheap. I was surprised to see Everbank's rate at 6 %. I invested out of Singapore. My bank is quoting 8.3 for a 3-month "CD," down from 8.5 two months ago. I will probably get out when my CD matures.
Though Everbank does not offer a rate on the Chinese Yuan, I have read other places, that it is available if you contact them.
I have invested some money very short term in NZ dollars. I have been there recently. I know people there and I know people in Thailand who have to pay bills in NZ, so they keep a close eye on things. Investment is still flooding into that country. Despite inflation, buying land and building a house are still relatively cheap. I was surprised to see Everbank's rate at 6 %. I invested out of Singapore. My bank is quoting 8.3 for a 3-month "CD," down from 8.5 two months ago. I will probably get out when my CD matures.
Though Everbank does not offer a rate on the Chinese Yuan, I have read other places, that it is available if you contact them.
Nothing wrong if you need to hold NZ dollars for personal or business reasons, expenditures, etc. But an investment position to speculate on the currency could be harmful to your financial health. One really has to ask why the Central Bank feels compelled to hold the administered interest rate at a lofty 8.25% in a country that is politically stable, democratic, and has an open trading economy? And when one thinks about the answer to that question, one should hesitate to go long that currency for anything but the shortest duration.
Steve Netwriter
03-11-08, 01:51 PM
Hi,
I live in NZ, and I've been watching currency related things very closely.
I've been watching as the Reserve Bank of NZ has been raising interest rates to cool the housing market. Now house prices are starting to fall, and the number of houses for sale is steadily rising while the number being sold is steadily falling.
This is impacting on building companies, as they have stock to sell, which is also impacting on all the building trades. I know this from talking to people locally.
For a while now they've been talking tough, and saying interest rates will stay high for the rest of the year.
Yesterday for the first time, one of the bank economists starting talking about the RB having to lower rates, if for no other reason than to stop the mortgage rates from rising due to the banks raising rates, which they are at the moment, despite the RB rate staying the same.
If you look at the NZ$JPY chart you'll see how the NZ$ has been in a bull market since about 2001. When subprime 'broke out' back in Aug/Sep there was a huge drop in the NZ$. It's been very volatile since then.
IMO it's going to drop very fast and very far any time soon when the economic sentiment towards NZ changes. And I think that will occur as the real state of the housing market starts to become better reported, and the effects of that start to impact on the wider economy here.
Only in the past few weeks it fell 10% against the JPY.
Even if I am wrong, IMO it's a very risky investment for a small return.
I am talking as someone who bought Yen with GBP back when the rate was 248. Now it's 206.
This chart shows the NZ$ drop and the volatility:
http://img.photobucket.com/albums/v207/neuralnetwriter/financial/Currencies/NZJPY_080311_medterm.gif
And the recent trend, even though the local economists have been talking about the "ever rising Kiwi".
http://img.photobucket.com/albums/v207/neuralnetwriter/financial/Currencies/NZJPY_080311_shortterm.gif
Steve
Thanks for the input guys. I see a further deterioration in the dollar, and I've thought about buying yen or swiss francs, the yield-reaching part of my brain however has a hard time reconciling a 1% or less yield, I'd rather put that money in gold in that case. That's why I was thinking NZ$, looked like it was stronger than Australian dollars (from what I understand the economic conditions there mirror or may be even worse for the A$ as it is for the US$). Canada looks stronger than the US dollar but they are lagging the US by about 2 years in their own housing bubble.
Euros and pounds I'm not touching, short of the fiver i found on the shuttle coming from LAX last year.
Steve Netwriter
03-11-08, 06:49 PM
I was going to mention gold, but I thought it was too obvious :)
IMO, don't chase the yield. I've made 20% since Sep with Yen with no yield.
But at the moment, IMO it's more about where is safe.
If you do want to pick a currency, I suggest trying to find one that is not on the chart that was posted on here of countries that have been importing money.
Well, like I said, if I'm going to get zero yield, i might as well buy gold - or actually probably silver, as I believe it has a lot more room to run. Or I could go with everbank's precious metals CD.
To me, buying a swiss franc is the same as buying gold. It's supposedly backed by gold right? So why not just go for the mellow yellow.
As far as yen, I have some comprehension of the carry trade and borrowing yen means you are shorting the yen, and unwinding carry trades causes short covering, but i mean... the whole yen thing seems too risky on any side to me.
As far as the NZD dropping v. the yen, that doesn't bother me so much, I'd prefer that it hold it's own against the dollar and other world currencies. Is there any chance of the NZD going the way of the Argentinian peso? That's the danger with the US dollar right now... so even if other currencies trounce the NZD in the next 6 months (length of a CD), as long as it doesn't do a cliff dive like the US dollar then I'd be okay with it. The question I was thinking about was, will the NZD lose 6% of value against the dollar in the next 6 months? And I was thinking the chance of that is minimal. Also the national debt of NZ seems a lot more reasonable than most developed nations - from wiki "its public debt stands at only 21.2% (2006 est.) [3] of the total GDP, which is comparatively small compared to many developed nation."
::shrug:: maybe I'll just buy some more of my favorite dividend paying stocks, they get better tax treatment anyway.
Well, like I said, if I'm going to get zero yield, i might as well buy gold - or actually probably silver, as I believe it has a lot more room to run. Or I could go with everbank's precious metals CD.
To me, buying a swiss franc is the same as buying gold. It's supposedly backed by gold right? So why not just go for the mellow yellow.
As far as yen, I have some comprehension of the carry trade and borrowing yen means you are shorting the yen, and unwinding carry trades causes short covering, but i mean... the whole yen thing seems too risky on any side to me.
As far as the NZD dropping v. the yen, that doesn't bother me so much, I'd prefer that it hold it's own against the dollar and other world currencies. Is there any chance of the NZD going the way of the Argentinian peso? That's the danger with the US dollar right now... so even if other currencies trounce the NZD in the next 6 months (length of a CD), as long as it doesn't do a cliff dive like the US dollar then I'd be okay with it. The question I was thinking about was, will the NZD lose 6% of value against the dollar in the next 6 months? And I was thinking the chance of that is minimal. Also the national debt of NZ seems a lot more reasonable than most developed nations - from wiki "its public debt stands at only 21.2% (2006 est.) [3] of the total GDP, which is comparatively small compared to many developed nation."
::shrug:: maybe I'll just buy some more of my favorite dividend paying stocks, they get better tax treatment anyway.
The Swiss Franc is no longer backed by gold. In a national referendum in 1999, Switzerland amended its constitution. One of the changes in the new constitution was the removal of the previous provision that Swiss Francs be backed by a minimum 40% in gold reserves.
If you plot the Swiss Franc and the Euro movements against the US$ so far this decade, you'll see the two charts look very similar, with a high correlation of the Franc & Euro. The Swiss National Bank will likely implement policies to ensure exchange with the Euro does not get too far "out of line" or the Swiss economy will suffer - I just happen to think the Swiss will be perhaps a little less blatant about depreciating their currency than the ECB. After all, they can't exactly go on an extended rate cutting exercise, can they...
Steve Netwriter
03-12-08, 09:31 PM
Jim Rogers: 'Abolish the Fed'
http://www.cnbc.com/id/23588079
He said he had a short position on all investment banks and is buying agricultural commodities such as cotton, wheat, coffee and sugar and was also buying the Chinese yuan and the Japanese yen.
I'm betting on the NZ$ falling quite a bit in the next 6 months. And by a lot more than 6%.
The only currencies that are going up are gold and silver, all the others are going down at different rates :(
Holy crap, has anyone been watching this? 3/13/08 in Japan, the yen has risen almost 1.5% against the dollar.
timberrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
just found it ironic that you guys were talking about this just before...
I'm wondering if 200b new dollars flooding the system is the cause (or at least the trigger for any dollar bulls to go bearish).
The Outback Oracle
03-13-08, 06:45 AM
DemonD it seems to me the currencies operate almost entirely on who has the highest interst rates will have the strongest currency. If that notion is exhausted then it turns to fundamentals like who is running Current account surpluses, but (unfortunately) it is sort of background noise. So the ONLY reason the NZ and A dollar are strong is high interest rates. However we are nop lewss indebted, and in many ways more indebted, than the US. High interest rates in NZ and A are unsustainable. The stress in Aus is already visible, not yet in employment but consumer sentiment has turned down sharply, motgage delinquency is increasing rapidly etc. So before long both NZ and A are both going to have to start lowering interest rates. You'll need ear protection to prevent earhearing damage from the crash in the currencies that will result.
One more observation, generally as the US dollar deteriorates the NZ and A deteriorate even further. This time has been a little different as we have had interest rates heading in entirely different directions. This situation cannot go on forever. The pressure that has been built up as a result will let go with a bang. Your 6% will disappear in a day and it will get worse from there.
Anyway that's my opinion FWIW. As I say, a bet which is opposite what I do always has a fair chance of success!
Steve Netwriter
03-13-08, 08:54 PM
You'll need ear protection to prevent earhearing damage from the crash in the currencies that will result. ... The pressure that has been built up as a result will let go with a bang. Your 6% will disappear in a day and it will get worse from there. Yes, exactly my view. DemonD it seems to me the currencies operate almost entirely on who has the highest interest rates will have the strongest currency. If that notion is exhausted then it turns to fundamentals like who is running Current account surpluses, but (unfortunately) it is sort of background noise. I think there are a number of factors to this. A simplistic view is this: When a currency has a high interest rate, and another a low one, so a carry trade can occur, there are two effects. Investors go for the interest rate differential, but in doing so they also push up the currency they are buying into, and lowering the one they are selling. That gives them an extra profit on the exchange rate move. This is a great free lunch, and has been going on for over 6 years. But at some time it has to stop going up, for no other reason than because the economy gets ruined, and the rates come down. The rush for the exits has been dramatic before, I IMO will be again. But, Rodney in NZ has done some excellent analysis of what affects the NZ currency, and it's mainly the economic outlook. I recommend you check out his article: What really drives the major cycles in the NZ dollar – the popular view that interest rate differentials drive the exchange rate is occasionally right, but it is only part of the story; this must-read report shows what really drives the NZ dollar. http://www.sra.co.nz/pdf/NZdollarRaving.pdf If you are interested in the NZ economy, he has a number of free articles: http://www.sra.co.nz/literacycentre.html Steve
Steve Netwriter
03-17-08, 05:10 PM
This is my 'cartoon' interpretation of the Yen carry trade with the NZ$.
http://img.photobucket.com/albums/v207/neuralnetwriter/financial/Currencies/NZJPY_080318.gif
This is my 'cartoon' interpretation of the Yen carry trade with the NZ$.
Nice graphic. :D
This is my 'cartoon' interpretation of the Yen carry trade with the NZ$.
http://img.photobucket.com/albums/v207/neuralnetwriter/financial/Currencies/NZJPY_080318.gif
Not at all far fetched. Spot on, actually.
Steve Netwriter
03-20-08, 12:14 AM
Guys, from two such well respected posters, your response is both surprising, and much appreciated :):):)
Thanks :)
Looks like the NZ economy, real-estate market and dollar are unravelling pretty quickly . . . oh, there's also an election due before Nov . . . be careful if you have money there.
http://www.nzherald.co.nz/category/story.cfm?c_id=34&objectid=10514575
metalman
06-05-08, 09:34 AM
Looks like the NZ economy, real-estate market and dollar are unravelling pretty quickly . . . oh, there's also an election due before Nov . . . be careful if you have money there.
http://www.nzherald.co.nz/category/story.cfm?c_id=34&objectid=10514575
so your economy goes to shit right after elections, too?
i'm thinking, if this is as good an election year economy as can be engineered... 9% on food stamps, $4 reg gas, rising unemployment, crashing housing market... what's it gonna be like after the election? :eek:
so your economy goes to shit right after elections, too?
i'm thinking, if this is as good an election year economy as can be engineered... 9% on food stamps, $4 reg gas, rising unemployment, crashing housing market... what's it gonna be like after the election? :eek:
Metalman, as an Aussie living in NZ . . . this is an election I will be really looking forward to . . . giving the current NZ socialist SOB's the flick!
However, I'm not 100% sure about the alternative.
http://www.johnkey.co.nz/
The only thing that scares me about this guy is that before he got into politics . . . he worked for Merrill Lynch as the head of European Currency Trading . . . now it looks like he'll be the next Prime Minister.
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