Kiwi rises on hawkish RBNZ

Posted On 11 Dec 2014
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USD/JPY and most JPY pairs plumbed fresh lows early with risk off. Bounces were seen later as the Nikkei recouped some of its early losses. USD/JPY fell from 117.98 to 117.44, adding to losses from 121.86 Monday. It then rallied to 118.34 on presumed GPIF purchases. GPIF was tipped to have bought the plunge to 117.90 Tuesday too. USD/JPY later stabilized just above 118.00, near so-so large option expiries. The bias remains down with risk still off and the Nikkei seen breaking below 17k after a close call early. Soggy core machinery orders helped as did net foreign bond sales by Japanese investors. More position paring is eyed into calendar year-end with the recently weaker JPY a major turn-off. EUR/JPY fared somewhat better, down to 146.45 and only marginally below NY’s 146.53 low before bouncing to 147.33 as EUR/USD rallied. Net short EUR positions could limit further losses. GBP/JPY too was slightly better bid, down to 184.94 before bouncing to 185.92. AUD/JPY was as low as 97.74 in New York and bounced later to 98.66 before steadying. NZD/JPY helped, with the cross rallying hard from 90.70 pre-RBNZ to 91.81 by the Asia open and 92.62 on a more hawkish than eyed RBNZ.

EUR/USD opened in Asia at 1.2448 after getting a lift overnight from broad, USD/JPY-led USD weakness and more short covering ahead of year-end. It continued to move higher early with stops triggered above 1.2450 and 1.2465 to a high of 1.2496 before option-related selling ahead of 1.2500 capped it. It later slipped to 1.2448 as USD/JPY reversed higher. A subtle shift in central bank expectations looks to helping EUR with falling US inflation expectations dampening the view of the Fed tightening sooner than later. The ECB too could drag its heels before embarking on full blown QE.

GBP/USD rallied from 1.5709 to 1.5757 in sympathy with EUR/USD before falling back to about where it started. EUR/GBP was better bid between 0.7910-34.

USD/CHF fell early alongside USD/JPY from 0.9669 to 0.9628 before bouncing to about where it started. EUR/CHF was better bid between 1.2029-37.

AUD/USD opened in Asia at 0.8319 after getting dragged higher late in the New York day by a surging NZD/USD. It drifted higher still early in Asia on USD/JPY-led USD weakness. From 0.8310 to 0.8345 into the jobs data, it popped to 0.8378 on what looked like a very strong report. AUD/USD later fell back on offers camped at 0.8380 and less flattering details of the jobs report. An USD/JPY reversal up helped. Gaps seen on the push up were filled as a result as the market pushed back down to 0.8325.

NZD/USD closed sharply higher in New York at 0.7813 in the wake of a more hawkish than expected RBNZ. Asia saw it up more from 0.7796 to 0.7872 before pushing back down to about where it closed in New York. AUD/NZD steadied between 1.0621-93 after the plunge from around 1.0780 on the RBNZ news. Despite hawkish rhetoric, latest polls show the RBNZ not expected to lift rates until December ‘15 at the earliest.

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