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New Zealand Dollar Higher on Risk Appetite Despite Wider Trade Deficit

New Zealand Dollar Higher on Risk Appetite Despite Wider Trade Deficit

2011-09-25 23:35:00
David Liu, Technical Strategist
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THE TAKEAWAY: Widening trade deficit due to higher greater imports > Increased risk appetite, activity with Australia > NZD retraces early losses

The New Zealand dollar gained back early losses as higher than expected imports widened the trade deficit for August. Although stagnant exports resulted from a drop in demand from China and Japan, a jump of commercial activity between the island nation and Australia joined improved risk appetite in pushing the Kiwi higher in early Asia.

EVENT

ACT

EXP

PREV

Trade Balance

-641M

-321M

111M

Exports

3.44B

3.44B

3.72B

Imports

4.08B

3.78B

3.61B

Trade Balance 12mo YTD

1084

1400

1295

Today’s trade report for August showed a heavy decline in New Zealand trade balance from its recent April 2011 peak of NZD 1149 million as a slowing global recovery sapped demand for soft commodities including meat, dairy and forestry products. Even though the trade balance fell to the lowest point since August 2009, a further look at the trade data suggests the change was due mostly to greater Kiwi demand for foreign goods, taking advantage of the strong New Zealand dollar.

Activity with its largest trading partner, Australia, increased as the island nation imported NZD 709.4 million of Australian goods compared with NZD 598.8 million in July. New Zealand exports to Australia increased from NZD 899.2 million in July to NZD 994.4 million in August, making up for NZD 8.9 million decline in Chinese demand for New Zealand goods.

New_Zealand_Dollar_Higher_on_Risk_Appetite_Despite_Wider_Trade_Deficit_body_Picture_5.png, New Zealand Dollar Higher on Risk Appetite Despite Wider Trade Deficit

New Zealand Trade Balance. Data from Statistics New Zealand.

The Kiwi weakened moderately immediately after the data release against the greenback, falling to its intraday lows of NZDUSD 0.77200. However, increased risk appetite evident in pre-Asia trading helped the NZD gain back its losses. At the time of writing, the Aotearoa dollar is the 4th highest gainer against the US dollar, adding 0.095% since the start of today’s session.

New_Zealand_Dollar_Higher_on_Risk_Appetite_Despite_Wider_Trade_Deficit_body_Picture_6.png, New Zealand Dollar Higher on Risk Appetite Despite Wider Trade Deficit

NZDUSD 5 minute chart; vertical line indicates time of data release. Chart generated with FXCM Strategy Trader.

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