Is One Kiwi Dollar about to be worth more than one Aussie?

We may have recently beaten the Kiwis (flogged them actually) in the Cricket World Cup Final but it’s the Kiwis who are winning the currency price race with one Kiwi Dollar now being worth the same as one Aussie Dollar.

This is the first time since June 1995 the AUDNZD has been this low.  It reached 1.0275 in June 1995 and since then has averaged around 1.2500 with a high of 1.3791 in March 2011. So why is the AUD dropping so far against the Kiwi Dollar? The answer is because the official cash rate at the RBNZ is 3.5% and the official cash rate at the RBA is 2.25% making a 1.25% interest rate differential between the two Central Banks. Graham Wheeler the RBNZ Governor won’t like the Kiwi overtaking the Aussie Dollar in value because it simply makes New Zealand less competitive on an international trade basis and with Australia being such an important export and tourism partner a high Kiwi Dollar is just not good for the Kiwi economy.

I am not sure too many Aussie’s will be able to bring themselves to go to New Zealand now $1 AUD ends up being worth less when they exchange it into Kiwi Dollars. Of course its great for Australian tourism and if you are worried about an influx of more Kiwis’ coming across the Tasman to live in Australia you should be. They are coming in droves now! 

650,000 Kiwi Citizens now live in Australia and the migration out of NZ to Australia has increased 40% in the last 10 years and is increasing every year. 650,000 Kiwis living in Australia is 12% of the NZ population. In comparison only 70,000 Aussies live in NZ, which is 0.03% of the Australian population.  With the AUDNZD now at parity and soon likely to be even lower the Government in New Zealand might just have to shut the exit door.

China and the Greeks spark market sell off.

It wasn’t just one thing it was a number of things that sparked the sell off on stocks and drove the Yen off its lows. Tuesday was a great example of traders buying the Yen in times of stock market uncertainty.




Chinese stocks went down 5% which is the equivalent of the Dow Jones being down 900 points (a big down day on the Dow Jones is about 150) and Greek stock markets dropped over 12.7% which is the biggest single decline in 27 years.

The Greek government has called an election a couple of years early and overall Europe has a big struggle on its hands and countries such as Greece, Spain and Italy will cause more grief over coming months and years for the European Central Bank.

The full LTG GoldRock Review of this Forex News can be found in the GoldRock Insider Report for Wednesday 10th December 2014
 

US Fed comments spark US Dollar rally. Tapers last $15 Billion of stimulus to zero.

There was great anticipation before the US Fed released its latest monetary policy statement early on Thursday morning and Fed Chair Yellen certainly didn’t disappoint US Dollar Bulls. The Fed decided it would taper the last $15 Billion it has been printing each month to zero and also spoke positively about the US jobs market. This end a trillion dollar money printing program that was this time last year running at $85 Billion Dollars per month.
The US Fed specifically said in its statement “Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources is gradually diminishing.”

Yellen spoke from both sides of her mouth as I expected saying the US Fed will raise rates if the economy keeps improving but she also said that the Fed may keep rates on hold even if the economy improves. So why did the US Dollar rise so sharply?

Yellen in her statement talked up the labor market in the US and said that "underutilization of labor resources is gradually diminishing", when in previous statements she said this was "very underutilized".

The bottom line is that traders took her statement to mean that interest rates are likely to rise sooner rather than later. 

You can read the full Official Federal Reserve Statement by clicking here. 

For the full LTG GoldRock market commentary on this Forex News item please read your LTG GoldRock Insider Report.

What's happening with the Yen?

Do you remember the earthquake that caused so much devastation in Fukushima in 2011? This quake has resulted in Japan closing down all its nuclear power facilities and therefore Japan has had to import more oil and gas to fuel Japan. This has come at huge expense and there are no plans to re-open these nuclear facilities any time soon. Therefore if the Yen is weaker import costs to fuel Japan are more expensive and thus creates more debt for a country that is already weighed down by decades of financial mismanagement and deflation. Japan is the ultimate financial basket case.

Everyone thinks Japan is a big exporter. Wrong. Exports in Japan only account for 15% of Japan's output. Why? Because over the years Toyota and most other big Japanese corporations have built factories overseas. As an example it is cheaper and more efficient to build cars in the USA than to build them in Japan and ship them over to the US.

This is an excerpt out of Monday the 20th of October LTG GoldRock Insider Report. If you are an LTG GoldRock there is a very detailed trade explanation for you in Today's report. If you haven't yet read it we highly recommend that you read it as soon as possible to maximise your profit potential.

Do you have any Pound Trades Running?

The Bank of England is going to rattle the cages of the Pound today at 10.00pm AEST so be aware if you have any Pound trades running.

LTG GoldRock are Forex Specialists who help support and mentor over 4,000 everyday investors within Australia and New Zealand. If you need assistance with your investing considering attending one of LTG GoldRock's live Coaching Sessions every Monday & Tuesday at 6pm AEDST. Go to www.ltggoldrock.com