NZD/USD See-Saws Dramatically as RBNZ Holds Rates & Signals Rate Hikes in the “Coming Months”

As unanimously expected by economists, the Reserve Bank of New Zealand held its cash rate at 2.50%. The central bank said that although domestic households “remain cautious” and business spending continues to be “weak”, the central bank continues “to expect the New Zealand economy to recover in line with or slightly faster than our March statement projections”. The RBNZ added that they “expect to begin removing policy stimulus over the coming months”, contingent on the recovery progressing as expected. Following the announcement, NZD/USD spiked by around 0.25 U.S. cents to $0.7233USD, an early session high, before falling to $0.7176USD. The short-lived rally can be explained by the central banks’ comment that rate hikes are scheduled for the “coming months” and the statement that the recovery is recovering “in line or slightly faster” than predicted in March. However, the ensuing weakness in the currency was probably in reaction to the more negative aspects of the statement.

AUD/USD Rallies as Australian Consumer Prices Exceed Expectations in Q1

Consumer prices in Australia increased at a slightly faster pace than expected in Q1. They rose 0.9% on the quarter, above call for a 0.8% increase to follow the 0.5% gain in the final quarter of 2009. Meanwhile, annually, consumer prices rose by 2.9% versus expectations for a 2.8% increase after their 2.1% rise in Q4. Following the above-consensus data, which suggest that another rate hike from the Reserve Bank of Australia is now more likely, AUD/USD firmed by almost 0.2 U.S. cents to hit $0.9192USD, a new intraday high.

Small AUD/USD Spike as Australian PPI Rises Faster than Expected in Q1

Australian producer prices rose at a faster-than-expected quarterly pace in Q1. PPI increased 1.0% on the quarter versus the consensus forecast for a 0.6% gain to follow the 0.4% decrease in Q4 of last year. Meanwhile, producer prices declined 0.1% on the year in Q1, above calls for a 0.6% drop after the 1.5% fall in the final quarter of 2009. Following the upside surprise in the data, AUD/USD firmed by almost 0.2 U.S. cents to touch $0.9286USD, just one pip south of the pair’s intraday high, before declining. The PPI report suggests that Australian consumer prices, released next week, may have risen by more than economists had expected. If so, the RBA will come under pressure to continue to increase interest rates to counter inflation.

JPY Weakens Slightly vs. USD as Japanese Corporate Service Price Index Falls by Less than Expected in March

Japan’s corporate service price index declined by slightly less than expected in March. The indicator fell by an annual 1.1% compared to the consensus call for a 1.4% drop to follow the revised 1.2% decline in February. Following the release, the yen weakened slightly versus the greenback. USD/JPY climbed by 0.18 yen to reach 94.18 before declining. However, the pair remained below its intraday high of 94.19 before declining.

NZD/USD Plummets as Kiwi Retail Sales Post Surprise Decline in Feb.

New Zealand retail sales unexpectedly weakened in February. Sales slipped back by 0.6% on the month in February, a move that was worse than the consensus forecast for a 0.2% rise to follow the revised 0.7% gain in January. Meanwhile, core sales (excluding autos) slipped by 0.9% in February, disappointing calls for a 0.4% rise to exceed the 0.3% gain previously. Following the downbeat data, NZD/USD sold off by 53 pips to hit $0.7086USD in a move that more than wiped out the minor 15 pip gain the pair managed on Tuesday. NZD/USD is now at its worst level since last Friday, when the pair touched $0.7162USD before it was strengthened by rumours of the Greek loans injecting risk appetite into markets. Support lies down at $0.7008USD from April 8.

Minor AUD/USD Rise as Aussie NAB Business Conditions Index Improves but Confidence Weakens

The Australian NAB business conditions index rose to a 13 level in March from an 8 print the month before. However, the business confidence component slipped back to a 16 read from 19 in February. The Australian dollar’s reaction to the mixed data has been understandably restrained as the currency has been torn between one component’s improvement and the other’s deterioration. AUD/USD has therefore only firmed by a tentative dozen pips to reach $0.9258USD versus a session high of $0.9276USD.

Yen Weakens vs. USD as BOJ March 16-17 Meeting Minutes Say that Suda & Noda Opposed Increasing Credit Program

The minutes from the Bank of Japan’s March 16-17 meeting revealed that Policy Board member Miyako Suda said there was no concrete rationale for increasing the central bank’s credit program to ¥20 trillion ($214 billion). Suda was joined in her opposition to doubling the scheme by Tadao Noda, who said the move would only have a limited impact. However, the minutes also revealed that many Policy Board members thought more lending would bolster the domestic economy. Following the release, the yen weakened against the greenback. USD/JPY rose by 0.17 yen to reach 93.23, a level just 7 pips below the pair’s session high.

USD/JPY Weakens as Japanese Finance Minister Says Economy “Gradually” Improving, though Self-Sustained Recovery Doubtful

Speaking at a press conference in Tokyo, Japan Finance Minister Naoto Kan noted that the yen is depreciating significantly. His comments come after Japan’s currency on Thursday hit its lowest level versus the greenback in more than seven months. With regards to the Chinese yuan’s exchange rate, Kan said it isn’t desirable to pressure Beijing on making the currency more flexible. He also said that the Japanese economy is “gradually” improving, though there’s only a “weak” possibility at present of a self-sustained rebound for the island nation. Following the finance minister’s comments, the yen strengthened, with USD/JPY falling to 93.68, a new intraday low, before pulling up from the brink. Traders undoubtedly picked up on Kan’s positive, albeit guarded, comments on the Japanese recovery.

Yen Rallies vs. USD as Japanese Tankan Survey Reveals Broad-Based Improvement in Q1

The Japanese Tankan survey for the first quarter of this year improved from its previous levels, especially in the non-manufacturing sector. The large manufacturers index rose to a -14 level, as expected, from -24 in Q4 of 2009. Meanwhile, the large manufacturing outlook increased to -8 in Q1 from -18 previously in a move that was also in line with the consensus forecast. The non-manufacturing index rose to a -14 read, beating calls for an improvement to -18 from -22 in Q4. Similarly, the non-manufacturing outlook component rose to -10 in Q1, overarching calls for an increase to -15 from -19 previously. Following the upbeat data, the yen strengthened: USD/JPY sold off by over 0.2 yen to hit a new intraday low of 93.41.