NZD rebound helped by softer RBA statement
The NZD opened on its lows yesterday and rallied over the course of the day on the back of the softer RBA statement which suggested that “carry” trades would continue to favour the NZD. Despite overnight AUD weakness and USD strength the NZD has held its ground with cautious bullish sentiment supporting the currency. It opens this morning around 0.6850, similar to last night’s closing level.
RBA statement lowers inflation expectations
The AUD saw some strong selling yesterday following the release of the RBA monetary policy statement which was seen as less hawkish than the market expected. The highlight of the statement, and key driver for the AUD fall was the RBA inflation expectations for 2007 being cut back from 3% to 2.75%. The bearish tone prevailed overnight and the currency opens this morning around 0.7720.
Japanese holiday sees yen through 122.00
USD/JPY pushed through 122.00 reaching a high of 122.10 during the local session but subsequently settled back just below the figure. Unwinding of carry trades ahead of Japanese growth data later this week were cited as a reason for the dip back below 122. Reports of a small explosion outside a US military base near Tokyo also contributed to the downward move. Elsewhere, GBP/USD fell to a one month low of 1.9438 against a resurgent greenback as an unexpected fall in producer prices cast doubt over the rate of UK inflation and the potential for future hikes. The euro traded comfortably around 1.3000 during much of the local session yesterday but suffered at the hands of a stronger USD during offshore trading falling to a low of 1.2941.
No US data to report.
UK producer prices suggest factory margins wider. In January, input prices fell 2.0% (thanks to oil prices), but output prices rose 0.3%. Also, house price inflation jumped from 8.8% yr to 9.9% yr in Dec, according to government figures (in line with the private sector measures). Both reports, at the margin, will tend to fuel expectations that the Bank of England will lift rates again in coming months.
