South Pacific Currencies Drop on Trade Deficit Data and Eurozone Elections

By TraderVox.com

Tradervox (Dublin) – The Australian dollar was just shy of this year’s low after the nation reported a more-than expected trade deficit. This has compounded already existing concerns that the spending cuts carried by the government will dampen the nation’s economic growth. The country’s budget will be announced on July 1 by Wayne Swan. The Aussie has dropped after gaining yesterday as riskier assets regained their losses after Europe election results on Sunday. The kiwi continued with its longest losing spell in six years as Greek political leaders met for the second day to try and form a coalition government.

According to Yoshisada Ishide, who is the manager of the world’s biggest mutual fund on Aussie-dominated bonds at Daiwa SB Investment, the factors that have supported the Australian dollar are disappearing and the market is realizing that the Australian Government cannot take stimulus measures and it is relying on monetary policy to support economic growth and the Aussie.

The Bureau of statistics reported that the country’s imports outdid the exports by A$1.587 billion in March. Moreover, the budget surplus is expected to contract which is expected to be negative for economic growth. However, a return to surplus will allow the Reserve Bank of Australia, room to make interest rate cuts.

Analysts are saying that the New Zealand dollar has succumbed to the weaker fundamentals that have been seen in the economy in the recent times hence the continued decline. Kiwi’s woes have been compounded by the weaker global sentiments particularly at the beginning of the week. The country has also registered a budget deficit that is wider than it had been forecasted by the market. Further, a report from the Treasury Department showed that the tax revenue slowed in March as the ANZ National Bank report showed that the export prices for commodities dropped by 4.5 percent in April.

Such concerns in the south pacific nations led the Aussie to drop by 0.3 percent against the dollar to trade at $1.0190. The kiwi was 0.1 percent lower trading at 79.36 US cents.

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