Aussie and Kiwi Fall Back Against U.S. Dollar on Mixed Results

The Aussie and the Kiwi retreated against the U.S. dollar on Tuesday, following mixed results from Australia's economy. At around 6 am GMT, the greenback added 0.52% to its value against the Aussie to stand at 0.9363, while at the same time rising 0.1% to 1.2064 against the Kiwi. The Aussie is under pressure following mixed economic results. On the upside, Australia's trade balance improved above market expectations. In May,

rose to AUD2.33 billion, from AUD1.62 billion in April. Most analysts had predicted a less impressive rebound of AUD1.91 billion. The improvement in Australia's trade balance was driven by rising exports, which increased by 3% to AUD26.26 billion, while imports remained roughly the same at AUD23.93 billion. The latest results show that Australia's exports sector is recovering following the devastating floods in Queensland. Australia is a major exporter of commodities. As a result, Australia is increasingly reliant on the economic performance of China, which is now the world's largest consumer of raw materials. China is tightening its monetary policy in order to prevent its economy from overheating. A slowdown in China could, therefore, halt the recovery of Australia's exports sector. Analysts were disappointed with the results of Australia's service sector, however. In June,

remained below the 50 points mark, which indicates contraction, for the second month running. After posting 49.90 in May, the service sector index deteriorated to 48.50 in June. It seems as if the Australian service sector is less able to shake off the strong Aussie than Australia's mining sector. The service sector disappointment comes on top of a surprise fall in retail sales. In May,

fell unexpectedly by 0.6%, when most analysts had predicted a rise of 0.3%. Following signs of weakening economy, especially outside the mining sector, not many analysts were surprised by the

to leave its interest rates on hold at 4.75%. The current level is still much above the interest rates levels in Europe, Japan and the U.S., which makes the Aussie an attractive investment. East of Australia, New Zealand's economy is showing signs of improvement following its problems with natural disasters. According to the latest data, the

rebounded in the second quarter, rising from -27 balance in the March quarter to the balance of +27. The rebound was not unexpected since the first quarter data was affected by the earthquake, which has caused havoc in the country's second biggest city, Christchurch. The health of the economies of Australia and New Zealand will depend on the demand for commodities coming mainly from the developing countries, as well as on the recovery of the domestic demand, which was hit by natural disasters. China and India are working hard at the moment to cool their economies, which should have negative repercussions for the Australian and New Zealand exporters. On the other hand, recent data indicates that the recovery outside the mining sector, especially in Australia, remains weak. Traders who believe that China will be able to cool its economy, which will hurt the prospects of both New Zealand's and Australia's economy, while the domestic demand in these countries will remain subdued, will be interested in the ETFS Short New Zealand Dollar Long US Dollar ETC (Sterling) ETF (SNZP) and the ETFS Short Australian Dollar Long US Dollar ETC ETF (

). At the same time, some traders will be more optimistic about the long term prospects of Australia and New Zealand. Even though there are setbacks in the recoveries of these two countries, the problems in Australia and New Zealand seem very trivial when compared to the debt problems of the Eurozone, for instance. As a result, some traders will be more interested in the CurrencyShares Australian Dollar Trust ETF

and the WisdomTree Dreyfus New Zealand Dollar Fund

.