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Alex Kazmarck http://spoteuro.blogspot.com |
RBNZ screwed me over! |
Hope you had a tight stop  |
Your not the only one, I am sure their were quite a few longs looking to grab a few more pips when low and behold 100pips evaporated in about 1 hour. |
that's right. but if price continues to climb, it'll happen again and probably next time RBNZ won't be alone.
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Human nature It is human nature to do things which they are told not to do. It is very evident from the RBNZ action that they don't want NZD above .7600. Even they are uncomfortable with .7550 I still see some people want to long NZD/USD, when the writing is ver clear on the wall. They have their own explanations, but i dont think it is worth to put a trade for a maximum 100 or so pips worth of gain. It's like fighting a central bank. Somebody asked a question for how long can RBNZ keep on selling NZD, the answer is they dont have to. They have indicated in very clear terms, current NZD exchange rate is not acceptable. This was just a gentle reminder. If speculators keep on purchasing NZD, they have an option to devalue the currency, which will be a disaster for carry traders or for that matter Japenese investors. |
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i wasn't necessarily talking about other central banks. as for how much money RBNZ is willing to spend into this... it's not about that. size does matter in forex but in this case they wanted to send a message, and i believe it was clear enough. remember, we're not talking about a russian guy who jumped in with a couple of hundred millions for a quick speculation... it was RBNZ. do you think long term investors will just keep going on a shopping spree to buy NZD after what happened now? i doubt it. if i were one, i'd be very careful. we might not see the effect immediately as this gesture was a symbolic one. but we're not far from a fall.
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Central Banks intervening in the currency markets can get burnt very badly, just take a look at what happened on Black Wednesday here in the UK (which made George Soros very rich)! If the RBNZ was really serious about allowing their Dollar to depreciate then they should really stop hiking interest rates, just the same as if Japan was serious about preventing its currency from being so weak then it would hike its interest rates so that it's Japanese baby boomers etc would not need to look to other countries for a savings account... |
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now we're on the same track.
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They would love to stop hiking rates, as they have been saying all along that they are unjustifiably high as it is. But the only way to slow growth is to hike rates. They are in a tough situation right now. They know that some more hikes may be in play, so they are doing the right thing by intervening. It's really the only thing they can do to attempt to keep this thing at a level where it won't absolutely kill their exports |
I live in NZ and am constantly amazed at the authorities in my country. We are a small economy dependent on the export of primary products, when our $ is high exporters hurt and money floods into the country.This money has to be lent somewhere and guess where it ends up, fueling an out of control property market.So the RBNZ puts up rates again, money is easy to aquire for property speculation and other consumer lending e.g car loans so the vicious circle continues.Meanwhile the people/industries that actually give the country it's wealth can't export their products because our $ is too highly valued. My solution would be to lower interest rates which would reduce the money supply and hence money avaliable for speculation in our property market, which believe it or not is what the RBNZ claims it is trying to acheive by raising rates. I should be speculating on the Kiwi but I don't as normally there is not enough action. |
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Bytebodger I don't agree, in the case of our economy I have seen the banks and other lending institutions falling over backwards to lend money to anyone. In fact there has been a large amount money lent to people who are bad prospects and the consequence has been a few large finance company failures in the last 12months.Banks have been very keen to lend 100% to property speculators because there is a belief that property can never fall in value in this country! Now all this money has to come from somewhere and it's coming from other countries investing in our high interest rates. I am actually in the used car business and when our interest rates are low lending criteria get much tougher and money is harder to get, which is the same with property mortgages. Anyway enough theory just watch for the Kiwi property crash which is inevitable.A big lender in the NZ property market is "The Hong Kong Bank" for example. |
When interest rates rise, fewer consumers can AFFORD loans, and the flow of money dries up. |
Alex K. |
Although reasonable thinking would suggest this relationship, this is certainly note the case in the UK. With the 100 base point increase that we have had since August 2006 we now have banks willing to lend people more times their basic income in order to get on the extremely highly priced property market in the UK. So, in this case you could say that with the increases in interest rates, which of course was partly fuelled by the ever increases in house prices, that the lending criteria has become less strict. Thus, I believe there is much validilty in what edge540 says, afterall he does in fact live in New Zealand! |
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