The New Zealand Dollar extended its recent sharp depreciation across the board today after it was revealed Reserve Bank of New Zealand sold a net NZ$ 521 million in August, the greatest amount since July 2007. Traders interpreted these data as a clear sign RBNZ has been conducting significant NZ$-weakening intervention for several weeks and this precipitated major sales of kiwi today.
New Zealand Prime Minister Key is reported to have said the ideal level for the New Zealand dollar is around US$ 0.65, apparently signifying the government's desire that the local currency come off more than another ten (10) big figures.
The chart below is our proprietary NZD Activity Index on a Weekly basis. We can see recent NZ$ selling pressure has been at its weakest level in about a year on Weekly charts.
This is a Daily chart of NZD/USD from August and September where we can see the rate moving from US$ 0.88 to below $0.78. RBNZ's NZ$ 521 million in sales helped that move lower. Ten (10) big figures in two months is a monster move.
Some FX traders may not pay attention to NZD/USD, but it has proven one of the best majors to trade. Even fewer FOREX traders are watching the kiwi cross rates. Take a look at this Weekly chart of NZD/CHF below. We can see this cross perfectly tested a major support retracement line around the CHF 0.7336 level. That is positive proof that there is major money being made on these kiwi cross rates.
It is as plain as day and evident on this NZD/CHF Monthly chart as well.
In a major currency pair - and its cross rates - that has limited liquidity to start with, it is clear the official competitive currency devaluation trade is becoming crowded.
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