GBP NZD Exchange Rate Soars, GBP USD Rate Lower On Fed QE Rumours

Published: Thursday, 30 May 2013 14:00 BST - Written by John Cameron

STORY LINK GBP NZD Exchange Rate Soars, GBP USD Rate Lower On Fed QE Rumours

The major mover of the sixteen most actively traded global currencies so far today has been the New Zealand Dollar. Investors have shifted out of the Kiwi Dollar in their droves, sending the Pound to New Zealand Dollar exchange rate (currency : GBP NZD) up to as high as 1.8850 earlier on. With the exception of a brief incursion above the 1.8800 level on 17th May, this was the first time that the pair has broken above this significant level since 11th February.
The forward move for GBP NZD was driven by comments from one man – Reserve Bank of New Zealand Governor Graeme Wheeler. Wheeler’s assertion that his Bank would be dumping more New Zealand Dollars on the market in the near term in order to weaken the nation’s currency caused market participants to turn their backs on the Kiwi Dollar.

However, looking at Wheeler’s words, the current bout of NZD weakness has the potential to be short-lived. The RBNZ Governor revealed that the first tranche of currency market intervention two weeks ago involved the sale of only NZD256m worth of assets – a meagre amount in comparison to the estimated US$3-4 trillion which is exchanged on the global FX markets on a daily basis. The revelation backed up Wheeler’s comments of earlier in the month which suggested that the RBNZ did not have the wherewithal to turn around the general direction of the Kiwi with its interventions, but could potentially take the top off any upward peaks for the Kiwi.
Wheeler also stated that the RBNZ would not immediately raise interest rates. His use of words suggests that the next move for New Zealand’s Official Cash Rate may be to the upside, an action which would trigger renewed support for the NZD.

In truth, the selling pressure on the New Zealand Dollar over the past 24hrs probably has as much to do with another dire performance from Japan’s leading share index last night. The benchmark Nikkei 225 slumped by 5.15% on the day ion fears that the US Federal Reserve may be about to begin scaling back its Quantitative Easing programme. The Pound to US Dollar exchange rate (currency : GBP USD) has edged lower on the rumours and the Pound to Australian Dollar exchange rate (currency : GBP AUD) has headed Northwards as a result.

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TAGS: American Dollar Forecasts Australian Dollar Forecasts Currency Predi Forecasts