As victims of carry trade liquidation, the Australian, New Zealand and Canadian dollars also sold off aggressively today. Unsurprisingly, the biggest mover was the New Zealand dollar which suffered greatly from last night?s dovish comments by Reserve Bank of New Zealand Governor Bollard. The trade balance is due for release tonight.
The strong kiwi is expected to turn the surplus into a deficit, which could exacerbate the currency?s weakness. The New Zealand dollar should also begin to under perform its Australian counterpart as the recent inflation data from Australia has the market pricing in another rate hike this year. A turn is in place for all three currency pairs. We continue to expect more weakness in the Canadian dollar, particularly against the Japanese Yen.