Latest economic data from both New Zealand and Australia showed improvement suggesting that the two Anglo Saxon economies in Asia Pacific may be the first to recover from the global economic contraction as they benefit from continuing Chinese demand.

The New Zealand GDP printed at -0.9% for the fourth quarter of last year as the country suffered its worst contraction in more than two decades. However, despite the falloff in output the number was actually better than the market forecast of -1.2% decline. Additionally the country’s February trade balance rebounded strongly registering a surplus of 489M versus expectations of 77M and a the prior months’ negative -101M reading. Although the improvement in trade was primarily due to a sharp drop off in imports indicating that domestic demand was weak, the numbers nevertheless should prove supportive to the kiwi propping up New Zealand’s balance sheet.

Over the past few months, a rally in U.S. equities has generally been met with a sell-off in the U.S. dollar. The primary reason was because parking money into the low yielding U.S. dollar was synonymous with risk aversion. Therefore one would expect that today’s 2 percent rally in equities should have driven the U.S. dollar lower against all of the major currencies. We did see dollar weakness, but it was only against the Australian and New Zealand dollars. The greenback increased in value against the Euro and British pound leading many traders to wonder why those currencies failed to participate in the rally.