USD drop kicks commodity currencies into touch

11.12 NZST, Wednesday 15 May 2013

USD drop kicks commodity currencies into touch

By Andrew May (Sales Trader, CMC Markets New Zealand)

The US dollar is going from strength to strength as investors shun the usually attractive growth yield currencies such as the NZD and beleaguered Aussie. The Aussie dollar dropped with conviction again overnight to 0.9890 after the latest Australian Budget painted a 'not so rosy' picture the economy could be expecting an AUD$18bio deficit after forecasting last October an AUD$1.5bio surplus.

The Kiwi suffered a similar injustice, retreating against all cross pairs. The NZDUSD at one stage dropped to under US 82c, fresh two month lows and looking very much set to retest 0.8074-0.8120 support if this cavalcade of buoyant US data continues.

It seems the age old saying 'what goes up, must come down' is looking to become rhetoric for the Antipodean currencies that usually flourish in times of positive US equity market translation. With the raft of somewhat stagnant Chinese data appearing neither here nor there, localised growth has become a focal point of contention for traders to contemplate. No more so than the recent Aussie rate cut that, paired with last night's Budget, has signalled there could be further easing on the cards. Likewise, New Zealand's dependency on its key trading partners has seen sways in NZDUSD plummet from a high this past week of 0.85 to open today at 0.8205.

However, there is a silver lining in lower dollar value. Exporters will finally be breathing a sigh of relief and US exporters can begin to target Australasian markets which can translate into equity gains and relocation manufacturing. But for now, and with New Zealand's 2013/14 Budget release due tomorrow and the high probability of revised surplus targets, expect more fireworks. It’s not over yet.
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