Foreign Currency Exchange

The NZD made reasonable gains in early trading following a poor end to last week, partly due to the US government’s announcement that they intend to bailout two major housing finance companies, notably Fannie Mae and Freddie Mac, which has helped to ease investor nerves on the global market. Analysts suggest that the NZD is likely to remain volatile for the next few sessions as the market digests the impact of the bailout, essentially investors are waiting to see if the action taken will stabalise the market as intended.

Also this week the Reserve Bank of New Zealand will announce its interest rate decision on Thursday, and a poll of analysts at Reuters suggest a 100% chance of a cut from the current 8% base level, although this may well be already priced into the market it is likely to contribute to volatile trading levels in the near future. The cut should promote spending in the economy and the treasury have highlighted that although they face a third quarter of contraction, the economy should resume growing by the end of the year.