NZ dollar falls on widening Australian trade deficit

NZ dollar falls as widening Australian trade deficit saps appetite for trans-Tasman currencies

By Paul McBeth

Oct. 3 (BusinessDesk) - The New Zealand dollar followed its Australian counterpart lower as a widening trade deficit across the Tasman added to growing pessimism about the prospects for Australasia.

The kiwi fell to 82.23 US cents at 5pm in Wellington from 82.62 cents at 8am and 82.80 cents yesterday. The trade-weighted index declined to 73.42 from 73.72.

Australia's trade deficit widened to A$2.03 billion in August from a revised A$1.53 billion shortfall between exports and imports a month earlier, according to the Bureau of Statistics.

That was worse than the expected A$685 million deficit, and added to the negative sentiment about Australia's economy after the Reserve Bank of Australia cut the target cash rate a quarter-point to 3.25 percent yesterday. The Australian dollar has shed 1.4 percent since the RBA announced its cut, trading at US$1.0222 at 5pm in Wellington.

"The Aussie's had a bad day, continuing lower, but there's a big technical level at US$1.015 and I suspect there will be buyers at some stage," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. "The kiwi's definitely weak on the day."

New Zealand's currency held gains against the Australian dollar, trading at 80.40 Australian cents at 5pm in Wellington from 79.85 cents yesterday.

The kiwi's appeal has grown with markets pricing in 95 basis points of further rate cuts by the RBA over the next 12 months according to the Overnight Index Swap curve, and eroding Australia's yield advantage.

The yield on New Zealand's benchmark 10-year government bond was 3.398 percent compared to 2.928 percent for the Australian equivalent.

Investors will be looking at ADP employment figures in the US during Northern Hemisphere trading ahead of non-farm payrolls data on Friday. The Federal Reserve has made the employment its key plank in assessing its quantitative easing programme as it looks to revive a stagnant jobs market to spur growth in the world's biggest economy.

The New Zealand dollar fell to 63.73 euro cents from 64.18 cents yesterday and declined to 64.30 yen from 64.64 yen. The kiwi decreased to 50.99 British pence from 51.29 pence.

(BusinessDesk)

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