Pullback in NZD is a likely buying opportunity
NZD’s poor overnight performance will likely represent an attractive buying opportunity. Two weak releases have weighed on the NZD – a much wider August trade deficit (NZD1.1191 bn vs expected 0.7bn) and dairy producer Fonterra’s profit warning that H1 2013 profits would be lower than a year ago. NZDUSD has retraced while the ongoing move lower in AUDNZD has abated. However, Fonterra also issued a strong forecast for milk prices which suggests dairy revenues could be up 50% higher this season. Diary exports represent around 7% of GDP. We already believe that the RBNZ will be one of the first G10 central banks to hike rates in 2014. Stronger diary performance will bolster such expectations and should prove NZD supportive.
Read the full report: FX Daily
BNP Paribas