AUD eases lower, CAD at 11-year lows

The Aussie dollar has continued to ease lower over the last couple days with a move back through the 73-figure.  At the time of writing it’s sitting around 72.4 US cents despite a little shift higher on the back of China import data which showed imports fell less than anticipated. Areas of short-term support were earlier tested resulting in further losses, albeit small, for the local unit.

Trade data released by the Customs Bureau showed exports were weaker than predicted, but imports, seen as a barometer of domestic demand, fell 5.6% on year – less than the 11.3% expected.

Yesterday we discussed the Aussie’s “trial separation” with commodities. Here’s another take from The Australian that’s worth a look on how M&A activity may be keeping the Aussie buoyant in the face of falling commodities.

Take a look at the Canadian dollar for example, which remains closely correlated with the Bloomberg commodity index. With its vast oil reserves it is no coincidence that the Canadian economy and its currency are reactive to the price of crude and key commodities. The CAD is at its lowest levels against the dollar since June 2004. For more C$ related moves, check out Point & Figure analysis by our very own Adam Taylor in his latest report which covers moves against Japanese Yen.

Chart by Bloomberg

Staying with commodity currencies and this week is critical for the Kiwi which has all but factored in a 25bp rate cut on Thursday. It widely expected the Reserve Bank of New Zealand will reduce rates to 2.5% this week as it attempts to stoke inflation and take a little more sheen of the NZ dollar. With markets pricing in a better than even odds chance of a rate cut it’s unlikely to present material further weakness for the kiwi – unless, of course, Governor Graeme Wheeler suggests there’s more to come, OR, the RBNZ shock the market and not cut rates – in which case the Kiwi immediately rally.  Coverage of the forthcoming rates decision at NBR. Still todays manufacturing data makes things a little more interesting with revisions to GDP being made after data showed the volume of goods in NZ rose 3.5%, and a 4.2% rise in the value.

From here the focus is back on the Euro, with 3Q Euro-zone Gross Domestic Product coming up in European trade which is expected to show quarterly growth of 0.3%, or 1.6% on year.