All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

Does New Zealand Data Suggest Further Strength for NZD/USD?

Last updated 3/27/2009 4:57 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

Boris Schlossberg

Director of Currency Research, GFT

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.

Despite the seemingly gloomy headline data, today’s numbers suggest that the New Zealand economy continues to outperform suffering a much shallower contraction in GDP  that any of its G10 counterparts. New Zealand’s exposure to China may also prove fruitful as the year progresses. If Chinese stimulus plan results in a pickup of demand for the country’s commodity based export sector, the New Zealand’s growth could turn positive once again before the year end. The IMF recently noted that “New Zealand is in a better position than most advanced countries to face the global storm, given its sound macroeconomic policies”. The IMF staff expects the New Zealand economy to contract by about 2% in 2009, with a gradual recovery over the medium term.

As one of only two G10 currencies carrying an interest rate higher than 3%, the kiwi provides an interesting opportunity for yield hungry investors.  Up to now the currency market had feared that RBNZ would continue to slash rate further. Indeed many analysts expect rates to bottom out at 2.5% before the year end. However, should global demand pick up even slightly the notoriously hawkish Governor of RBNZ Allan Bollard is likely to keep rate steady in order to contain price pressures. While the rest of the G10 universe appears to mired in a protracted recession with rate hovering near zero probably well into 2010, the kiwi could remain the lone high yielder in the group. The unit has already  had a substantial rally off its February lows of 4900 and will now likely correct a bit as it faces stiff resistance at the 6000 level, but any could be a long term buying opportunity as the kiwi represents one of the purest currency bets on the  global recovery  

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.