It will be a quiet day for the Asian-Pacific currencies with New Zealand producing the only major indicator of the health of its economy. Unfortunately for the Kiwi, this data fell below analysts' expectations.
According to data released earlier today, the New Zealand trade balance surplus shrank from a revised level of NZ$1,148 million in April to NZ$605 million in May, when most analysts expected the May surplus to be around NZ$1 billion. Deterioration in the trade balance data is mainly a result of surging imports. In May, the New Zealand economy imported goods worth NZ$4,021 million, higher than analysts' forecast of NZ$3,750 million and April's NZ$3,350 million. On the other hand, New Zealand's exports fell slightly from an upward revised NZ$4,678 million in April to NZ$4,021 million. Most analysts had predicted the May exports to rise slightly to NZ$4,725 million, however.
The Kiwi suffered big losses in today's trading on the news. At around 6:00 am GMT, the U.S. dollar added 1.24% to its value to trade around 1.2453. The Kiwi is the biggest loser among the Asian-Pacific currency, but certainly not the only one. The greenback also rose 0.69% against the Aussie, making an additional step to parity with the Australian currency, currently trading around 0.9598.
New Zealand and Australia are major exporters of commodities and in today's trading the prices of commodities provided a significant headwind for the Aussie and the Kiwi, as the prices of the most important commodities fell across the board. Gold lost 0.11% and is approaching the $1,500 level, currently trading around $1,501.35. Silver suffered much heavier losses, however, sliding 1.29% to $33.88. Crude oil, on the other hand, is on its way to fall below the $90 mark. At the moment, it trades around $90.40, or a fall of 0.88%. Natural gas retreated 1.1% to $4.214, while copper is trading just above the $4 mark, after falling 0.82% to $4.071.
The Japanese yen suffered the smallest losses from the major Asian-Pacific currencies, losing 0.49% of its value against the greenback to trade around 80.755. All three Asian-Pacific economies are suffering from the negative effects of naturals disasters. It seems traders are increasingly worried by how strong the recovery of these economies really is.
Traders who believe that this is just a temporary setback for the New Zealand economy and that it could still generate enough steam for the Kiwi to keep trading high against the U.S. dollar and other major currencies will be interested in the WisdomTree Dreyfus New Zealand Dollar Fund (NYSE: BNZ). Traders who believe in this scenario will also be keeping a close watch on the performance of the Chinese economy, which is becoming increasingly important trading partner for New Zealand.
Other traders might be more skeptical about the Kiwi. The Eurozone crisis has the potential to transform into yet another global crisis. If the global economy moves back into recession, the prices of major currencies are likely to fall, hurting New Zealand's exports. As a result, this environment would create a lot of downward pressure for the Kiwi. Traders who find appeal in this scenario will be more interested in the ETFS Short New Zealand Dollar Long US Dollar ETC ETF (SNZD).
This article was originally published on Benzinga, and is republished here with permission.
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