Rand up, Kiwi down

Kiwi grounded

It was the NZ dollar's turn to come in for a spanking on Monday. It lost more than a cent to sterling and was down by an average of -0.7%. With no obvious reason for its decline the word on the street is that was the result of a bull squeeze.

Just as the US dollar's rally on Friday was disproportionate to the (lack of) excellence of the employment data, so yesterday's mark-down of the Kiwi seemed an over-reaction to the sole NZ statistic. The Reserve Bank of New Zealand's quarterly survey found inflation expectations to have slipped to 2.09% in two year's time from the 2.17% reported three months ago. Yes, that is a theoretical negative for the currency, in that it means less upward pressure on interest rates. But such a small change in such a subjective measure can have been no more than a pretext for yesterday's move.

Where on Friday it was the dollar bears that were squeezed out of their positions, yesterday it was the Kiwi bulls who were pressured into reducing their holdings. It should be borne in mind that the NZ dollar is far less liquid than the US dollar, accounting for just 2.1% of turnover in an FX market where the Greenback accounts for 87.6% and sterling 12.8%. In other words, it would not have taken a wall of money to move the Kiwi.

Secret ballot cheers rand

A no confidence motion against South African president Jacob Zuma will be decided today by a secret ballot, unlike previous efforts to unseat him. Investors believe this improves the chance of Mr Zuma being replaced by somebody more to their liking. The rand reacted positively, strengthening by 1.4% on the day.

Mr Zuma has not endeared himself to investors, who perceive him to be less than wholly transparent and above board. He has survived five previous confidence votes but all of those were held in plain sight: dissenters within the ANC had to toe the party line or risk losing their jobs. A secret ballot could break that feedback loop.

For the rand it will be another of those binary situations. If Mr Zuma wins the support of parliament the rand will fall and if he is ousted it will go up. The likelihood of it going nowhere is minimal.

Missed it

More than half of today's economic statistics were already done and dusted by the time London opened. Those that remain are very definitely not the stuff of legend: for a second day investors will be struggling for inspiration.

Trade figures from Japan and China showed both countries enjoying a wider trade surplus while business confidence improved in Australia. Germany's trade surplus also widened, though with lower volumes of both imports and exports.

For those with no interest in Greek industrial production, Canadian housing starts or US job openings the rest of the day will be a bit of a desert. Watch the rand.