Foreign Currency Exchange

Last week saw volatile trading on the Sterling/Kiwi cross; a common story for many of the major sterling crosses in fact. Of course the news that Sterling hit its lowest point against these major currencies in the last twelve years was a major reason for the volatility. However there was a surprising amount of information from the Kiwi economy that moved the market as well. Indeed the first surprise came when the Kiwi strengthened on the back of better than expected retails sales that sparked the late revival of the Kiwi last week.

Up until this point last Thursday, the story had been of large scale unwinding of carry trades. The effect this had was to completely negate the effects of sterling’s early weakness and move the cross up to the early 2.70’s, a position whereby many traders imagined further gains towards the mid 2.75’s. However, as is so common in the notoriously volatile world of currency trading, the sharp movement up was followed by an equally sharp movement down, with the Kiwi moving in value from 2.73 to under 2.60 per pound within one morning. To demonstrate the severity of this move of around 5% in around 3 hours; if you were moving £100,000 down to New Zealand to emigrate you would have lost £5,000 in a matter of hours.

With this cross looking as though it will remain equally volatile in the near and medium future, the savvy consumer looking to purchase Kiwi dollars will look towards Limit and Stop Loss orders to make the most of these peaks.