ja_mageia

Tuesday 21^st October 2008 

Weekly Ranges:

AUD/USD:           0.7239/0.6493
NZD/USD:           0.6350/0.5917
NZD/AUD:           0.9198/0.8739

Dominated by the announcement last weekend of co-ordinated financial markets bail-out packages, and subsequently followed with the immediate  implementation of some of those measures, global equity markets  breathed a sigh of relief and produced historic rallies on the week.

The AUD/USD opened 175bps higher on Monday morning than it had closed the previous Friday, having been sold heavily the previous week on risk aversion trades and the global slowdown  story.

Extreme volatility and continuous news risk meant that we kept open FX positions relatively small, and managed our options exposures accordingly.  We were able to lock in the premiums taken on our options positions, and effectively hedge the exposure.  Not a lot of sleep – but the effort paid off.

The recovery story is still in play and the market is again starting to look at fundamentals.

The market is eagerly awaiting the RBNZ’s interest rate decision and announcement on Thursday, with the market widely expecting a full 1pct rate cut.

Given that things have calmed down significantly we have had a very high CPI number today, there is an outside chance that the full 1pct is not delivered, however we feel that this would be a missed opportunity for the RBNZ.

Increased stability has provided some support for the AUD and the NZD , however future interest rate cut expectations would suggest that this support will be short lived as the market starts to focus on fundamentals once again, and the fact that there is a global recession around the corner.

We are looking sell  NZD/USD on rallies and looking to short EUR/USD for a move lower once again.