Any thoughts on the exchange rate at present?

[Super_BQ]

Credit given to benandclare's post (for those that couldn't see the link they made), it shows:

GDP - composition by sector: agriculture: 4.4%
industry: 25.7%
services: 69.9% (2008 est.)

Definition: This entry gives the percentage contribution of agriculture, industry, and services to total GDP. The distribution will total less than 100 percent if the data are incomplete.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of September 17, 2009


http://www.indexmundi.com/new_zealan...by_sector.html

Of course we could argue what % component is tied to agriculture than just the 4.4%, though I still stand strong that exports is still relatively a small component of the overall country's economy.

When I was at uni back in BC (Canada), one of the econ profs claimed that the biggest problem BC had was it's "lack of diversification". This happened during the time where the forestry industry had collapsed and the EU was boycotting BC made products for un-ethical forestry practices. The same fate could be the same for NZ and I believe Kiwis should be very happy to see that NZ is not a country that is mostly tied to primary exports tied to agriculture. Unlike how the TV media portrays, it is far from what it seems that farming is one of the biggest components for the country's economy.

When we're talking currency exchange rates, keep in mind that the fluctuations are based on inflows and outflows of currency (free floating exchange rate). The more $ that leaves NZ than coming in (in relation to a foreign currency), the weaker the NZ$ would be. Likewise if NZ experiences more $$ coming in than being sent out, the stronger the currency we'll have. Now this is assuming all other factors are kept constant (ie printing $).

[kiwishred]

Originally Posted by Super_BQ

When we're talking currency exchange rates, keep in mind that the fluctuations are based on inflows and outflows of currency (free floating exchange rate). The more $ that leaves NZ than coming in (in relation to a foreign currency), the weaker the NZ$ would be. Likewise if NZ experiences more $$ coming in than being sent out, the stronger the currency we'll have. Now this is assuming all other factors are kept constant (ie printing $).

Except, according to this article about 80% (based on 2007 figures) of NZ$ currency exchange occurs outside NZ. No inflow or outflow in those transactions.

Another mind-boggling data point from that same article: The amount of $NZ traded in a day or so on the foreign exchange markets is about the same as the total value of a year's worth of imports to plus exports from NZ .

Seems to me that the value of the $NZ has little to do with moving foreign funds into the country to purchase milk powder, or even to purchase high yielding debt, and everything to do with pure speculation.

Brent

[petri]

Originally Posted by kiwishred

Seems to me that the value of the $NZ has little to do with moving foreign funds into the country to purchase milk powder, or even to purchase high yielding debt, and everything to do with pure speculation.

Buy stocks for a company that seems to be handling the recession quite fine and it's the same thing -- the stock price isn't attached to the reality. The market is run by robot software that work with high-volume, "sexy" stock.

The slide of USD stalled when US government issued a record high $123 billion worth of bonds late in October.

[Madoxen]

well it's at 2.295 atm so seems to be creeping the right direction

[nifta]

a good PMI yesterday certainly helped.. people are starting to think the horrendous GDP figure may be in error... but... BoE QE announcement today. if they announce an extension of QE then it may be bad for sterling.

[Madoxen]

Still going up

[Mamee & Co]

Probably because the speculators were expecting a higher figure for QE..when I saw the QE release I was pleasantly surprised when the £ did not fall back again.

[Mamee & Co]

Just looked at the last 24 hour graph and £ fell by about 3c at midnight. Anybody kow why?

[nifta]

not sure, but i think it might be due to the dollar strengthening (due to fonterra), rather than the pound falling:

http://www.stuff.co.nz/business/mark...keep-climbing/

[doowrehsij]

I'm going to say because the Dow has rallied 150 points so far, based on comments that the IMF will do what ever it takes to prop up the economy. Apparently the NZD is treated a little like a commodity and there certainly seems to be a bubble brewing.

I wouldn't be suprised if it goes pop and there is a lot of selling! But this is only my opinion!