ja_mageia

Monday 15^th September 2008 

Weekly Ranges:

AUD/USD: 0.7895 / 0.8352
NZD/USD: 0.6435 / 0.6840
NZD/USD:  0.8103 / 0.8347 

Last Week:

The major development in the region last week was the somewhat surprising 50bp cut by the RBNZ. The market extended the sell off in the NZD/USD to below 0.6500, but it did not stay down there very long, as the factors affecting the U.S. financial markets and investment banking institutions came back into focus and the USD was sold off across the board. AUD/NZD bounced aggressively on this news, and the somewhat less dovish testimony from the RBA governor earlier in the week.   

What we did:

We had correctly forecast a 50bp cut by the RBNZ, against the consensus market view for 25bp.We were short NZD/USD and NZD/JPY into the RBNZ rate cut decision, and were able to buy both of these positions back at pretty much the absolute bottom. Whilst being short of both NZD/USD and AUD/USD we have continued to be mindful of the problems on the horizon with regards to U.S. financials, and have been careful to take our profits when able to do so. We remained long  AUD/NZD and increased the position through purchasing a call option at the bottom of the market. 

This Week:

This week’s activity will be determined entirely by the fall-out from what would appear like a filing by Lehman Brothers Investment bank for bankruptcy.
Several attempts at saving the bank have taken place of the past week/weekend, but newswires are now predicting bankruptcy and the creation of a so called  ‘dirty bank’ for their distressed assets – primarily mortgage backed securities. We are hearing that Merrill Lynch may well merge with Bank of America, but this still leaves the likes of Washington Mutual and AIG Group exposed to further write-downs and speculative selling pressure.  

What we will do:

We are positioned for a sharp selloff in the USD, as we believe that the Fed could be pushed into a further reduction in interest rates.It can reasonably be assumed that the US stock markets will also come under considerable pressure this week.  

THE WEEK AHEAD

Monday 15th

AUS 
WELLING STARTS, JUN QTR

US
INDUSTRIAL PRODUCTION, AUGCAPACITY UTILISATION, AUG

NZ
MANUFACTURING ACTIVITY, JUN  

Tuesday 16th

AUS
RBA MEETING MINUTES, SEP

US
FOMC MEETING AND INTERESTRATE ANNOUNCEMENT, SEP
CPI, AUG
NET LONG-TERM TIC FLOWS,
NAHB HOUSING INDEX, SEP