New Zealand Dollar Poised to Gain as China GDP Likely to Impress
Fundamental Forecast for US Dollar: Bullish
- NZ Manufacturing Remains Expansionary Amid A Strengthening Kiwi
- Kiwi Little Changed Despite Lower Total N.Z Card Spending
- Commodity Currencies Continue Climb on Curious Chinese Trade Data
The New Zealand Dollar continued its gains for the fifth consecutive week, rallying by 1.7 percent against the Greenback. The kiwi was one of the biggest benefactors of the Bank of Japan’s aggressive asset purchase program, with the NZDJPY hitting a five year high on Thursday of 85.99.Investors appear content with purchasing the Kiwi given its relatively high yields and positive returns, in part due to the nation’s improving economic data. Also, this week sawa record-high unemployment report out of Australia, which helpeddrive traders to purchase the New Zealand currency. Looking forward, the kiwi is likely to remain resilient amid an optimistic outlook concerning Chinese economic data.
Next week, China, the world’s second largest economy and New Zealand’s largest business partner, is expected to report that its economy grew at a faster pace over the most recent quarter. China’s Q1 Gross Domestic Product (YoY)is estimated to have expanded by 8.0 percent, the highest level since the first quarter of last year, according to a Bloomberg News Survey.Strengthened consumer spending and greater fiscal expenditures could help maintain China’s recovery in the first half of 2013. Based on the historical ties between the two countries, New Zealand should benefit greatly from a stable and growing Chinese economy.
In recent years, China has relied heavily on its exports and investment to spur strong growth, but the surprised March trade deficit may signal a key import shift. The surge in imports due to an increased demand for commodities indicates that domestic purchases are picking up and China is attempting to move away from export-led to import-led growth. This is good news for China’s business partners including New Zealand and Australia. A rise in demand for foreign goods by Chinese businesses and consumers should directly benefit New Zealand’s producers of goods and services. In addition, the same positive influence is reflected in the elaborate fundamentals of the Australian economy, which is New Zealand’s largest export market. Thus, the New Zealand market and the kiwi can benefit two-fold from an improved outlook in China.
In terms of the NZDJPY, traders will want to keep a close eye on the G20 summit in Washington next week, as it may discuss monetary policy actions that devalue nation’s currencies. Japanese Vice Finance Minister said in an interview that “we will explain that we are doing the utmost to beat deflation and that if it helps the Japanese economy recover, which would contribute to Asia and the world economy”. If Japan’s aggressive monetary policy wins the understanding of the world’s major economies, the Japanese Yen could continue falling against the kiwi. -RM
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