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Kiwi Takes a Hit on Fonterra and Trade Deficit

Posted by WorldWideMarkets . on Sep 26, 2013 3:07:00 AM

The New Zealand dollar briefly took hit but so far there is no stampede to exit the kiwi. New Zealand posted its biggest trade deficit since September 2008 in August and a record for any year in August. Higher imports were named as the culprit for the deficit with the nation bringing in an oil drilling platform, railroad wagons and cars. In an economy the size of New Zealand’s the import of an oil drilling platform alone is enough to cause anomalies.
 
Adding to the drama was an earnings warning by dairy giant Fonterra who said earnings for the first half would be lower than the comparable period a year ago. With dairy contributing around 7 percent to the country’s gross domestic product that was also bound to hurt.
 
But while the New Zealand dollar sold off after the combined bad news, it still retains its 8 percent plus gain against the U.S. dollar for the month. Investors at least are betting the kiwi has more room to run for now even if it’s only on the promise of an interest rate hike from the Reserve Bank of New Zealand some time next year.

Still, there is a long way between now and next year and the promise of a rate hike is not going to keep interest up the whole time. There must be more than one investor out there sitting on this month's gain against the dollar ready to pull the pin and sell. When it comes, they will all move at once.kiwi trading

 

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