Thursday 15 October 2009

US Dollar collapse?

iPredict has opened a market on whether the Kiwi dollar will hit or pass parity with the US any time before 2011. Matt opened the contract at $0.20; it's dropped since to about $0.15. Still VERY early trading -- I expect this one to drop below $0.10 as the chances of RBNZ currency intervention in the event of total US dollar collapse are non-trivial -- but interesting that folks are buying this one at $0.15. The $NZ hasn't gone much above $0.80 US in the last decade and is currently sitting around $0.73.

...and now the price has dropped to 4 cents. We'll see where things stabilize. Matt keeps the market maker's liquidity very thin on opening 'till things settle down to avoid taking too huge a loss on the initial price adjustment. I'm happy about the three shares I shorted at $0.17.

...and now it's up again to $0.17 and some of my asks are being taken. 129 contracts traded in the couple minutes since the market opened.

... ok, seeding the book with low bids and high asks to play a bit on the volatility.

... and it's dropped to $0.12

... and the visible order book now contains only market maker orders -- everyone's placing orders against the book rather than in the book (within the visible range)

Fun stuff. I should be shorting this one massively as a hedge: my salary starts to look very nice if the $US is at parity with $NZ. Liquidity constraints....

Update: and the contract has now stabilized with a big buy order (300 units) at $0.10. So somebody's put a reasonable stake in that there's a ten percent chance of a US currency collapse.


  1. According to an article on stuff, $NZ is going up (and will continue to go up!) against the $US after the release of the inflation figures this morning, in anticipation of the RBNZ putting up interest rates to knock inflation on the head.

    I see it's sitting at 0.744 now, wonder how much higher it will go in the short term?

  2. Yup. But it's not crossed $0.82 or so in more than a decade. Markets are saying $0.74 for December of this year....