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06/10/2007 - RBNZ intervenes to stem Kiwi gains

Posted by FOREX.com's Weekly Strategy in June 11th 2007  
* RBNZ intervenes to stem Kiwi gains
* US yields rally sharply, but look to have peaked
* Shake-out in carry trades looks to be short-term
* Heavy US data schedule in second half of week

The USD had one of it better weeks last week, rising against European currencies and the JPY, while remaining mostly sideways at low levels against the minor dollar pairs. Stronger US data (higher ISM non-manufacturing and narrower trade deficit) and hawkish commentary from Fed Chair Bernanke and other Fed officials saw US 10 year Treasury yields spike to 5.25% from 4.95% at the start of the week, though the weekly close looks to constitute a rejection from the key 5.25% level. Along with the US data and Fed comments, a not-completely unexpected NZ rate hike ignited global fears of higher interest rates which led to a shake-out of speculative positioning across global markets. As a part of this, the US stock market swooned in mid-week, but recovered about half of its losses by the end of the week, reinforcing the idea that the wave of risk reduction might have already run its course.  Full text »

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Filed under: Weekly Strategy