Quiet weekend sees NZD hold in range
The NZD continued to strengthen throughout both yesterday’s local session and overnight, with yield driven buying continuing to be one of the main factors supporting the currency. The G20 meeting over the weekend did not discuss the carry trade that has seen large borrowings in the weaker yen being used to purchase high yielding currencies such as the NZD. Stop-loss buying has pushed the NZD higher overnight, with NZD/JPY trading above 79.00.
AUD breaks 0.7700
The AUD has also gained some support from yield driven buyers following the G20 meeting in Melbourne. After trading under 0.7700 for the last week and a half the AUD broke through to reach a high of 0.7704, where it opens today. The AUD also saw some selling pressure against the stronger performing NZD. The NZD/AUD cross moved back to two week highs at 0.8695.
Yen neglected at G20 conference
In the absence of any significant economic data overnight the market took its lead from comments, or more specifically a lack of comments, by Japanese officials at the G20 meeting in Melbourne held over the weekend. In particular, there was no attempt to talk the yen higher and that the effects of yen carry trades were over estimated. This led to a round of yen selling against most currencies with EUR/JPY benefiting the most by reaching a record high of 151.68. The euro also got a boost against the dollar after ECB President Trichet was quoted as saying the ECB is “strongly vigilant” on inflation and that other central banks should be too. Gains were short lived however as the euro ran into stiff resistance around 1.2850 and ubsequently finished the session on its lows.
GBP initially rallied after robust housing data but eased back from an intra-day high of 1.8988 to open this morning around 1.8960.
US leading index rises 0.2% in Oct. The leading index grow at a slower pace in Oct than Sep, which was revised up from 0.1% to 0.4% due to the subsequent release of very strong orders data (almost entirely due to Boeing). Money supply growth, consumer expectations and equity prices were the main contributors to the Oct rise; vendor delivery times, building permits and orders were the main offsets (though the orders number is a projected reversal of Sep’s strength, the data not actually available until 28/11). Interesting to note that the last two readings on the leading index are the first consecutive positives for the series this year.
Canadian wholesale sales fell 1.6% in Sep, although solid gains earlier in the quarter mean that Q3 still managed to deliver faster wholesale sales growth than in Q2 – a sign that GDP growth may have accelerated.
German producer price inflation slowed from 5.1% yr to 4.6% yr in Oct, thanks to lower energy prices.
UK house prices accelerated from 11.5% yr to 12.4% yr in Nov, according to the Rightmove real estate agents’ group. That is the fastest pace for two years. Other data included a mild deceleration in money supply M4 growth from 14.5% yr to 14.0% yr in October, and mixed mortgage lending data for that month from various industry groups (full figures from the BoE due 29/11). Also the Oct public sector net credit requirement was a bigger than expected repayment of £8.4bn, due to increased corporate tax revenues. This will enable the Chancellor to present some up-beat budget forecasts when he delivers his Pre-Budget Report on Dec 6.
