Market Overview

Kiwi and Aussie Go Separate Ways against U.S. Dollar

The Aussie and the Kiwi went separate ways against the U.S. dollar on Monday. At around 5:45 am GMT, the U.S. dollar added 0.21% to its value against the Aussie to stand around 0.9419. At the same time, the greenback fell 0.06% against the Kiwi to 1.1829. The Kiwi and the Aussie were still too strong for the euro, as the embattled European currency fell 0.41% against the Aussie to trade around 1.3233 and 0.76% against the Kiwi to stand around 1.6621.

The Kiwi found support in rising inflation. According to Statistics New Zealand, New Zealand's CPI rose 1% in the June quarter, compared to the March quarter, when most analysts had predicted a 0.8% rise. On an annual basis, the June quarter inflation was 5.3% higher. The latest data should put more pressure on New Zealand's central bank to start raising interest rates soon.

New Zealand's economy has been rebounding strongly, following the devastating earthquake that has struck its second biggest city of Christchurch. Its recovery was helped by higher prices of commodities and strong demand from China, an increasingly important trading partner for New Zealand. Rising inflation might worry some analysts that the recovery is simply too strong and that New Zealand's central bank will have to interfere in order to prevent New Zealand's economy from overheating.

The Australian economy produced some good news today as well. In June, Australia's seasonally adjusted new vehicle sales were higher 1.3%, compared to the previous month, a strong rebound from a 7.5% fall recorded in May. Like New Zealand, the Australian economy is recovering from the effect of natural disasters. Its economy contracted in the March quarter, but the latest data might encourage analysts that the rebound of the Australian economy is going to be strong in the June quarter.

Among the commodities, precious metals were the main winners on Monday as gold moved passed the $1,600 mark. At the moment, gold trades around $1,600.65, or 0.41% above previous close. At the same time, silver made even bigger surge, rising 2.13% to trade around $40.16. Copper made smaller gains, rising only 0.08% to stand around $4.418. Monday's losers were fossil fuels. As the greenback's value rose, crude oil fell 0.25% to $97.46, while natural gas lost 0.04% to stand around $4.553.

ACTION ITEMS:

Bullish:
Traders who believe that the greenback gains are only temporary, since the U.S. still needs to resolve its debt ceiling crisis, might want to consider the following trades:

  • WisdomTree Dreyfus New Zealand Dollar Fund (NYSE: BNZ) is a long play on the Kiwi. BNZ will rise if the Kiwi appreciates.
  • CurrencyShares Australian Dollar Trust ETF (NYSE: FXA) is a long play on the Aussie. FXA should rise if the Aussie appreciates.

Bearish:
Traders who believe that Australia and New Zealand will struggle to reach full recovery, which should depress the value of their currencies, may consider an alternate positions:

  • ETFS Short Australian Dollar Long US Dollar ETC ETF (SAD) is a short play on the Aussie. SAD should rise if the Aussie depreciates.
  • ETFS Short New Zealand Dollar Long US Dollar ETC (Sterling) ETF (SNZP) is a short play on the Kiwi. SNZP will rise if the Kiwi depreciates.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Posted-In: Long Ideas News Short Ideas Currency ETFs Forex Economics Trading Ideas ETFs

 

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