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New Zealand Dollar Falls on Weak Domestic Data

David Meyer

Foreign Exchange Indicators Outlook before ECB Meeting

(Continued from Prior Part)

Westpac consumer confidence at 3-year low

There was pressure building up on the New Zealand dollar as consumer confidence in New Zealand, reported by Westpac on September 21, 2015, fell to a three-year low of 106 in 3Q15. Although a level of 106 is still considered positive, the negative bias in the market was due to the fact that it was below the historical average of 111.5.

According to the report, the decrease in consumer confidence was primarily driven by low dairy prices and ineffective government policies. Consumer seemed to be more reluctant to buy household goods, with only 20% being of the view that it is a good time to buy compared with 29% in June.

Fed’s Lockhart gives hawkish statement

Federal Reserve Bank of Atlanta President Dennis Lockhart seemed rather hawkish in his speech at the Buckhead Rotary Club in Atlanta. He was of the view that the phrase “later this year” in the context of a rate hike was still relevant. He added that the economy appeared to be getting ready for a first policy move on course for a normal interest rate environment.

Lockhart’s statement puts additional focus on the Fed’s October meeting. The combined effect of weak domestic data and Lockhart’s statement saw the New Zealand dollar–US dollar pair fall by 0.99% on September 21, 2015.

Impact on the market

The iShares MSCI Pacific Ex-Japan ETF (EPP) fell by 0.34% on September 21, 2015. The other major ETF in the Oceania segment, the iShares MSCI Australia ETF (EWA), was also trading negative and fell by 0.86%.

Let’s look at Australian American depository receipts (or ADRs) trading in US markets. BHP Billiton (BHP) fell by 1.30%. In the mining sector, British-Australian multinational Rio Tinto (RIO) fell by 0.56%. Australian banking ADR Westpac Banking (WBK) fell by 1.16%.

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