Friday saw J.P.Morgan add a short NZD trade....>

KIWI: Friday saw J.P.Morgan add a short NZD trade vs. a 50/50 basket of AUD and

USD, which aims to "exploit a potential relative value play while also keeping a

defensive tilt, albeit moderated. Even despite AUD's remarkable retracement from

mid-March lows, there are reasons to believe that AUD can extend its recent

outperformance against NZD. One justification remains the relative policy

divergence in the approach to asset purchases, where RBNZ has thus far

distinguished itself as particularly aggressive in meeting the financing need of

the government, and are not averse to policies that would be decidedly-negative

for the currency (specifically, the possibility that the RBNZ might buy foreign

assets). The RBA, by contrast, has begun tapering its purchases. To be sure,

relative central bank action is not the foremost driver for currency markets,

and each of NZD, AUD and USD will take their cues from the state of the global

downturn and eventual rebound. But at least as markets move directionally,

increasingly clarity around the nature and intent of asset purchase programs may

provide sufficient differentiation for value."