Australia, NZ dollars find their footing; trade boom a help

SYDNEY: The Australian and New Zealand dollars regained some composure on Thursday as global risk sentiment improved a little and a record Australian trade surplus underlined the natural inflows supporting the currency.

The Aussie inched up to $0.6953, having bounced from Wednesday’s low of $0.6887, but remains well short of its recent six-week top at $0.7048.

The kiwi dollar firmed to $0.6285, after finding support around $0.6214, but again is shy of its recent peak at $0.6352.

A bounce in world stock markets and some easing in the tensions around Taiwan also helped the Aussie rally 0.5% on the safe-haven yen to reach 92.97.

Helping at the margin was data showing Australia’s trade surplus had surged to a record A$17.7 billion ($12.30 billion) in June, led by gains in gold and metals exports.

That brought the rolling 12-month surplus to a whopping A$137 billion, a net inflow of cash to the Aussie and a boon to mining profits and government tax receipts.

“These numbers are at an astonishing high level and are being supported by rising volumes and prices of exports,” said Belinda Allen, a senior economist at CBA.

“The trade surplus for the quarter was an extraordinary $A45bn, up from $A29bn in Q1, and we expect net exports to add around 0.8%pts to Q2 GDP growth.” The gross domestic product report is due on Sept. 7 and is shaping up to be quite robust.

However, the outlook is not so bright, with surging inflation and rising interest rates set to drag growth down sharply into 2023.

The Reserve Bank of Australia (RBA) will release its latest forecasts on Friday and has already foreshadowed a steep rise in inflation to a top of 7.75% and a slowdown in growth to just 1.75% for next year.

That is a major reason why markets have pared back the likely peak for interest rates to around 3.3%, from more than 4% in June, and are pricing in rate cuts by late next year.

In New Zealand, interest rates are seen topping out around 3.85% by April, with cuts coming before 2023 ends.