18 Aug 2015
NZ needs to hedge China fro now on - ANZ
FXStreet (Guatemala) - Analysts at ANZ noted that China dominated last week, driving NZD lower by causing an increase in the global risk premie.
Key Quotes:
"For currencies the move was important, as China moved to a more market-oriented method of setting their currency rate."
"While the PBOC retains the ability to intervene in the currency, the new “central parity rate” will be set close to the USD/CNY spot closing rate. This allows the USD/CNY to be driven by market forces and effectively de-pegs the CNY from the USD, allowing NZD/CNY a degree of freedom of movement."
"Businesses with Chinese exposure will now need to hedge NZD/CNY, whereas before NZD/USD had been sufficiently correlated to cover exposure."
"These events only increase the importance of monitoring Chinese events. We expect China to remain a focus, but see the situation as having stabilised – for now at least."
"This week we believe the USD will reverse weakness against G3 and continue to broadly strengthen – aided by regional Fed surveys, Fed speakers, and the FOMC Minutes."
Key Quotes:
"For currencies the move was important, as China moved to a more market-oriented method of setting their currency rate."
"While the PBOC retains the ability to intervene in the currency, the new “central parity rate” will be set close to the USD/CNY spot closing rate. This allows the USD/CNY to be driven by market forces and effectively de-pegs the CNY from the USD, allowing NZD/CNY a degree of freedom of movement."
"Businesses with Chinese exposure will now need to hedge NZD/CNY, whereas before NZD/USD had been sufficiently correlated to cover exposure."
"These events only increase the importance of monitoring Chinese events. We expect China to remain a focus, but see the situation as having stabilised – for now at least."
"This week we believe the USD will reverse weakness against G3 and continue to broadly strengthen – aided by regional Fed surveys, Fed speakers, and the FOMC Minutes."