NZD Money Supply Conspiracy Theory | Forex Factory

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NZD Money Supply Conspiracy Theory

  • #1
  • First Post: Edited 8:30am Sep 28, 2006 7:52am | Edited 8:30am
I think that the hedge Fund carry traders really have more control over the value of the Kiwi then their central bank does. What we really saw here is a plea from their government to the carry traders to let the currency devalue. Why would the NZ goverenment want the Kiwi to go down? They need to increase exports, as the trade balance is having a negative affect on the GDP; a lower value in the Kiwi will help to increase exports.
  • #2
  • Sep 28, 2006 8:39am Sep 28, 2006 8:39am
i think you got it backward. a weaker currency is better for trade balance. this is why the BOJ always tries to depress the yen.

the weaker the kiwi, the more kiwis they will get for their exports, tipping the trade balance in their favor.
Relax and be happy.
  • #3
  • Sep 29, 2006 8:54am Sep 29, 2006 8:54am
LOL...i'm not sure who has this right...NZ has a negative trade balance (imports > exports), which is having a negative effect on their GDP.

If i'm in the US and I want to buy wool from NZ, I can buy more of it as the Kiwi depreciates relative to the $. Hence the exports will go up as the KIWI goes down, improving the trade balance and the GDP.

Does this make sense? Besides. you seem to be agreeing with me; their finance minister wants the Kiwi to depreciate...
  • #4
  • Dec 31, 2006 3:37pm Dec 31, 2006 3:37pm
Quoting NewstraderFX
LOL...i'm not sure who has this right...NZ has a negative trade balance (imports > exports), which is having a negative effect on their GDP.

If i'm in the US and I want to buy wool from NZ, I can buy more of it as the Kiwi depreciates relative to the $. Hence the exports will go up as the KIWI goes down, improving the trade balance and the GDP.

Does this make sense? Besides. you seem to be agreeing with me; their finance minister wants the Kiwi to depreciate...
no you're right, china, japan, all manufacturing exporting countries wants a decrease in value of their currency to keep them competitive for exports.
  • #5
  • Dec 31, 2006 4:27pm Dec 31, 2006 4:27pm
Quoting NewstraderFX
If i'm in the US and I want to buy wool from NZ, I can buy more of it as the Kiwi depreciates relative to the $. Hence the exports will go up as the KIWI goes down, improving the trade balance and the GDP.
you are looking at the import side of the equation. if you are importing from another country, yeah you want their currency to be weak. if you are exporting to a country, you want your currency to be weak. same idea but from two different perspectives...
Relax and be happy.
  • #6
  • Dec 31, 2006 4:36pm Dec 31, 2006 4:36pm
Quoting merlin
if you are exporting to a country, you want your currency to be weak. same idea but from two different perspectives...
gee, the Germans must be happy
  • #7
  • Dec 31, 2006 6:31pm Dec 31, 2006 6:31pm
As a Kiwi maybe i should answer this...lol.

Lastest Change
GDP (nominal) $157.9b. +18%

Household debt $149.6b +49%

NZs offshore bank loans $104.4b +45%
NZs Current Account:
Exports.............................. $34.1b +17%
Imports.............................. $37.3b +25%
Investments payments $13.8b +53%
Current account deficit $14.4b +144%

NZ Balance sheet.
Total offshore assets. $107.6b +25%
Toatal offshore Liabilities $244.7b +27%
Toatal offshore deficit $137.1b +28%.

The high intrest rates, and resulting flows of funds into the country, have underpinned the value of the kiwi. The high kiwi has had a negative impact on the export sector, which offers the best prospect of sustained and healthy longterm economic growth.

There are three main potential economic scenarios for NZ in 2007 and beyond.

1) Residential housing prices level out and there is a substantial reduction in the growth of household debt. Under this situation, which is the preferred scenario, the Reserve Bank will begin to reduce intrest rates in the second or third quarter of 2007 and the dollar will boost the export sector and signal the long awaited shift from a borrow-and-spend to an export economy.

2)House prices,personal debt,intrest rates and the dollar contiune to increase and the economy stays stronger for longer.This will have a positive impact on GDP growth in 2007 but raises the odds of a hard landing in the second half or later.

3) And last is a hard landing, This is where house prices fall,lenders demand additional security, consumer spending slumps and the economy flattens or contracts.

Economists are not expecting the last one in 2007 but if the average NZer contuines to borrow and spend, and fails to develop a strong export sector, then a hard landing for the NZ economy is a strong possibility in the medium term.

On a per head basis, every man, woman and child now have $36,000.00 of debt compared to $25,000.00 three years ago.

We are now one of the most indebted countries in the world..

Glenn
  • #8
  • Dec 31, 2006 6:54pm Dec 31, 2006 6:54pm
Quoting glenn5t
As a Kiwi maybe i should answer this...lol.

Lastest Change
GDP (nominal) $157.9b. +18%

Household debt $149.6b +49%

NZs offshore bank loans $104.4b +45%
NZs Current Account:
Exports.............................. $34.1b +17%
Imports.............................. $37.3b +25%
Investments payments $13.8b +53%
Current account deficit $14.4b +144%

NZ Balance sheet.
Total offshore assets. $107.6b +25%
Toatal offshore Liabilities $244.7b +27%
Toatal offshore deficit $137.1b +28%.

The high intrest rates, and resulting flows of funds into the country, have underpinned the value of the kiwi. The high kiwi has had a negative impact on the export sector, which offers the best prospect of sustained and healthy longterm economic growth.

There are three main potential economic scenarios for NZ in 2007 and beyond.

1) Residential housing prices level out and there is a substantial reduction in the growth of household debt. Under this situation, which is the preferred scenario, the Reserve Bank will begin to reduce intrest rates in the second or third quarter of 2007 and the dollar will boost the export sector and signal the long awaited shift from a borrow-and-spend to an export economy.

2)House prices,personal debt,intrest rates and the dollar contiune to increase and the economy stays stronger for longer.This will have a positive impact on GDP growth in 2007 but raises the odds of a hard landing in the second half or later.

3) And last is a hard landing, This is where house prices fall,lenders demand additional security, consumer spending slumps and the economy flattens or contracts.

Economists are not expecting the last one in 2007 but if the average NZer contuines to borrow and spend, and fails to develop a strong export sector, then a hard landing for the NZ economy is a strong possibility in the medium term.

On a per head basis, every man, woman and child now have $36,000.00 of debt compared to $25,000.00 three years ago.

We are now one of the most indebted countries in the world..

Glenn
All this having been said, with the exception of the high interest rate, there is really no good, logical explanation for the increasing strength of the NZD the second half of 2006. I cannot imagine anyone being helped by this phenomenon other than the carry traders.

It is hard to believe that the carry traders could have such a strong impact on the currency. On the other hand, I just do not see any other logical explanation.
  • #9
  • Jan 1, 2007 12:27am Jan 1, 2007 12:27am
Quoting glenn5t
On a per head basis, every man, woman and child now have $36,000.00 of debt compared to $25,000.00 three years ago.

We are now one of the most indebted countries in the world..

Glenn
Q: What's the capital of New Zealand?

A: Oh, about twenty cents ...

Rob (With apologies to Fred Dagg.)
  • #10
  • Jan 2, 2007 12:35pm Jan 2, 2007 12:35pm
back to subject:

I read in a paper today with the notion of money supply and interest rates. The paper had the tone that lower interest rates would enhance more money supply, which again, conincides with devaluation of currency.
  • #11
  • Jan 2, 2007 5:34pm Jan 2, 2007 5:34pm
Quoting haiqu
Q: What's the capital of New Zealand?

A: Oh, about twenty cents ...

Rob (With apologies to Fred Dagg.)


LOL!

That bad huh?
  • #12
  • Jan 2, 2007 5:49pm Jan 2, 2007 5:49pm
New Zealand's unemployment rate was 70% in July (it's yearly low.)

Now it is only 30%. Unemployment went down, and Kiwi strengthened.

Source: http://www.nationalbank.co.nz/economics/regional/
  • #13
  • Last Post: Jan 3, 2007 2:55am Jan 3, 2007 2:55am
Pure carry trade.

NZDJPY..looks like has no efect on with news or statatics..its just goes where the yeild is high.

NZD has no option but to print more kiwi to make folks purchase more yen.
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