Kiwi slide to continue
By Arnaud Masset
Since a Labour coalition government was announced last week, the New Zealand dollar has fallen almost 3.50%. We maintain our target at US$0.6888 per Kiwi (low of 11 May), with the next support marked at US$ 0.6676 (low of May 2016).
The NZD was by far the worst performer among G10 currencies this morning. The Kiwi rose to US$0.7004 before reversing to US$0.6926, after Prime Minister Jacinda Ardern announced her new government would review and reform the central bank’s mandate, giving it an employment target as well as its existing inflation one. Also sending the Kiwi lower was Ardern’s comment that central bank should have more power to manage the NZD’s value against other currencies.
Besides reforming the central bank, the government also plans to forbid foreign purchase of real estate, trim immigration to 30,000 a year, create a fund for regional development and plant 100 million trees per year.
Happy Nikkei
By Yann Quelenn
With Sunday’s victory of sitting Prime Minister Shinzo Abe, free money is likely to keep flooding Japan for some time. The benchmark Nikkei index has stormed to an all-time high to 21,805 points.
The yen has also climbed (i.e. depreciated) against the US dollar, now marking 113.50 for one USD. This may sound contradictory, but the truth is that Abenomics so far has not reached its goals. Japanese debt has never been so high, the country is struggling with deflation, and wage growth is very low. The truth is that Japan needs this very loose monetary policy just to keep going.