Kiwi Crunched, Big Day in Japan

The New Zealand dollar closed at the lowest levels in a year but held above the 2013 lows. The euro was the top performer Monday while the Aussie lagged along with the kiwi dollar. It's a major day for Japanese economic data with reports on jobs, industrial production and retail sales due. 2 new Premium NZD trades have been issued ahead of the upcoming NZ data.

Intervention talk in New Zealand is the major theme in the FX market to start the week. NZD/USD fell as low as 0.7707 in Asia-Pacific trading as the market digested evidence that a deliberate RBNZ attempt is underway to cripple the kiwi.Support at the 2013 low of 0.7689 wasn't seriously challenged and the pair bounced as high as 0.7795 before settling near 0.7765 at the end of US trading.

Politicians have been quick to distance themselves from the moves Prime Minister John Key disavowed any knowledge of intervention and the finance minister said the decision was taken independently at the RBNZ. We find it hard to believe the highest levels of government wouldn't be consulted in any FX intervention and even less believable in this case because Key was formerly an FX trader.

That may indicate Key knows the risks of failure and doesn't want his political life tied to the whims of the FX market, even though he was just re-elected. In any case, the lack of total government commitment is one reason the kiwi could bounce but that phase may not yet have arrived.

Up next the focus shifts northward in the Pacific to Japan – another place where officials would be happy to hasten a currency decline.

They may have additional ammunition after today's round of economic reports. The slate starts with the jobs report at 2330 GMT but that's rarely a market mover in Japan. The riskier reports are 20 minutes later with industrial production and retail trade. Production is expected down 1.1% y/y and retail sales up just 0.1% compared to last year. Soft numbers could rekindle talk of Japanese action.