How IDEAglobal Moves Markets

IDEAglobal's exclusive conference call with NZ Fin Min Cullen delivers immediate market impact.

• On June 25th at 0700gmt, IDEAglobal hosted an exclusive conference with New Zealand Finance Minister, Dr Michael Cullen. This was the third such call IDEAglobal has hosted with Dr Cullen.
• In candid commentary, Dr Cullen relayed:
  • AUD/NZD at 1.1760 (i.e. AUD0.85 per NZD) was a long-term equilibrium rate, which he felt AUD/NZD would gravitate back to.
  • That the 50bps of yield premium that NZD currently enjoys over AUD (NZD cash rates currently 5.25% vs 4.75% for AUD) could be withdrawn in the next six to 12 months
  • Leveraged household balance sheets played far less of a role in NZ monetary policy settings than in Australia.

As IDEAglobal conveyed these insights to its customer base, AUD/NZD reacted immediately, rallying almost 1% (see graph).

Even the UBS internal web page acknowledged that it was Dr Cullen driving AUD/NZD (see below) '25.06.2003 11:15:00 (GMT) TTFX AUDUSD : trips some buy stops above 0.6680 .. probably more AUDNZD behind it after NZ's Cullen earlier reportedly suggested acceptance of a weaker kiwi'

IDEAglobal is privileged to enjoy excellent relations with the global policy community and to find out more how IDEAglobal can better manage your global macro-economic risk, please contact:

Michael Gallagher,	Chris Turner,	John Davitte
Director of Research	Senior Partner, FX	Senior Partner, EM
+44 207 664 0203	+44 207 664 0245	+44 207 664 0292
mgallagher@ideaglobal.com	cturner@ideaglobal.com	jdavitte@ideaglobal.com

Following the Fed's decision to cut the funds rate 25bps to 1.00%, on June 26th, 2003 IDEAglobal identified short CHF/ZAR as one of the best yield plays for the Summer. Here's what we said:

' Yield differentials will roughly deliver a 1% gain per month and we believe the USD, ZAR, CHF dynamics should work well here. For example, the SARB is one of the few central banks in the world with an inflation problem. The SARB targets yy CPIX in the mid point of a 3-6% range and in May, CPIX stood at 7.7% yy. CB Governor Mboweni welcomes a 'much stronger ZAR' to battle inflation and we believe the market is too aggressive in pricing in a further 300bps of rate cuts for the remainder of this year. Additionally, we believe the Rand's 'commodity status' can provide insulation to a pick up in US activity. NB the rally in commodity FX in Q1/Q2 2002 on better US activity data. Those most vulnerable to a pick up in US activity data would appear to be low yield continental European currencies which had gone a long for the ride on the USD's demise - step forward CHF. . The SNB currently targets 3 month Libor at 0.25% and as SNB's Roth noted today, Q2 growth will 'at best' be zero, versus a contraction in Q1. Policy tools are now limited for the SNB and should growth or inflation deteriorate any further, the market will begin to speculate about SNB intervention to weaken the CHF from already weak levels. . We believe the combination of Summer markets, the Fed, the SARB & the SNB make short CHF long ZAR a good trade and look for 5.60/64 support to break and ultimately deliver a return to the April low of 5.16, i.e. a 10% drop from current levels.'

And here's what happened:See graph.

For further information on IDEAglobal's full range of FX products, including intra-day analysis on Reuters & Bloomberg, pdf Morning Briefings and SMS alerts, please contact:

EUROPE	THE AMERICAS	ASIA
Cheryl-Lisa Hearne	Eric Feld	Diva Pillay
+44 207 664 0218	+1 212 271 0776	+65 6332 0700
clhearne@ideaglobal.com	efeld@ideaglobal.com	dpillay@ideaglobal.com