The New Zealand dollar ended the day up against most of the majors, with the exception of the Australian dollar and Japanese yen.
The currency showed only a very short-term reaction to the release of New Zealand’s trade balance, which unexpectedly posted a deficit of NZ$417 million during the month of June, bringing the annual deficit to NZ$3.176 billion, as exports plunged 19.3 percent and imports jumped 18.3 percent. However, the increase in imports was due almost entirely to a one-time boost from Jetstar Airways, which bought aircraft in order to start a new service.
Despite these lingering signs of economic slowdown, the Reserve Bank of New Zealand (RBNZ) is still anticipated to leave the Official Cash Rate target unchanged for the second straight meeting at 2.50 percent. In RBNZ Governor Alan Bollard’s last policy statement, he said that there was evidence that “international economic activity is stabilizing and international financial conditions are improving.” However, these comments were some of the only confident ones, as he went on to focus on downside risks to activity and inflation, with the appreciation of the New Zealand dollar creating an “unhelpful tension” with their projections. A reiteration of these talking points within the upcoming policy statement could push the New Zealand dollar higher once again. However, the currency could pull back if the central bank sounds more cautious on growth prospects and leaves the door open once again to “modest” reductions “in coming quarters,” as they’ve said in the past that they “expect to keep the OCR at or below the current level through the latter part of 2010.”
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