Australian Dollar Jumps versus NZ Dollar (AUD/NZD) Regardless of Weaker Australian Construction Data

Modified: Sunday, 8 March 2015 14:31 BST - Written by Minesh Chaudhari

STORY LINK Australian Dollar Jumps versus NZ Dollar (AUD/NZD) Regardless of Weaker Australian Construction Data

The Australian Dollar surged against the New Zealand Dollar on Friday despite less favourable Australian domestic data. The Australian Performance of Construction Index recorded another decline in February, falling from 45.9 to 43.9. AiG, who undertake the survey, stated: ‘While house building is retreating from relatively healthy levels, it is no longer offsetting the well-entrenched decline in mining-related engineering construction activity. The house building sector remained in negative territory, but its rate of decline moderated, following a loss of momentum in January.’ In addition, AiG suggested that ‘a lack of public sector tenders and soft private sector investment’ were also dampening production.

However, one factor to offer the Australian Dollar support was the rise in Australian Foreign Reserves. The figure climbed in February from $62.5B to $64.3B and supported speculation that the Australian central bank hadn’t been intervening in the market in order to drive the ‘Aussie’ lower. This week also saw a rise in Australian Retail Sales, climbing by 0.4% in January after December’s 0.2% increase. Economist Adam Boyton commented: ‘Looking ahead, we think there is a reasonable prospect of a lift in the retail sector, especially given lower petrol prices, lower interest rates and signs of renewed strength in the housing market.’

However, Australia’s trade deficit nearly doubled in January as imports took a sharp upswing. The January ecostat resided at -980M from the previous -503M. The figure came in weaker than initial estimates of -925M. The Australian Dollar has remained remarkably resilient in recent months, despite a drop in the price of iron ore and a cut to the benchmark interest rate. However, the ‘Aussie’ has fallen by around 30% versus the US Dollar since 2011, a development that the Australian central bank will be grateful for.

Meanwhile, the New Zealand Dollar has tracked a lot of the ‘Aussie’s’ movement this week with NZ domestic data extremely thin on the ground. However, the latest Fonterra dairy price auction saw another rise in value for New Zealand’s largest commodity, dairy. International prices recovered further after falling by around 50% last year; however, volumes decreased at the most recent auction. Experts are also unclear regarding ongoing demand from China; economist Con Williams stated: ‘Since 2008 we have obviously had a growing export profile to China – quite aggressively through all the major commodities groups. They have all been tripped up – at one point or another – for various reasons, but at the moment we are noticing quite a slowdown in demand from China.’

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