What happened to the Kiwi?

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What happened to the Kiwi?

By Grace Cheng on September 6, 2006 | More Posts By Grace Cheng | Author's Website

The pronounced weakness of NZD/USD in the past two days can be attributed mainly to two factors: First, the sudden strength of the Japanese yen on Monday and Tuesday has caused an unwinding of carry trades, particularly in the NZD/JPY since this pair has a high yield for carry traders. Since the latter is a composite pair of NZD/USD and USD/JPY, carry traders shorted both NZD/USD and USD/JPY to unwind their NZD/JPY longs. The second factor …

was due to the strength of AUD versus NZD, as AUD rose in anticipation of the rate decision revealed this morning by the Reserve Bank of Australia. NZD/JPY looks likely to continue its uptrend after two days of sharp retracement, unless its movement is interrupted by any comments from the Bank of Japan on Friday.

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