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NZD and AUD Stage Strong Comebacks as Commodity Prices and Equities Recover

The US Dollar has strengthened right across the board today making it hard for pretty much anything to advance. Nevertheless, support for the Australian currency was to be found in China resulting in the AUD, and NZD, putting in some impressive performances.  

"AUD/USD lost ground overnight and fell to a low of 0.8930 as the USD strengthened post FOMC. It has popped higher since however and trades at .9015 currently, this after Chinese HSBC Flash Manufacturing PMI beat expectations overnight, printing at 50.1 vs. expectations for 48.3," says Alex Edwards at UKForex.

The China 'flash' HSBC manufacturing PMI for August surprised on the upside, rising to 50.1 compared with consensus of 48.2 and June's final print of 47.7.

"We think inventory rebuilding after a period of destocking is driving stronger activity in Q3. The official NBS manufacturing PMI likely rose in August from 50.3 in July. Activity growth is also likely to improve y/y. Q3 GDP growth could be slightly better than Q2, but our baseline view is still no sustained acceleration in domestic demand," says Joey Chew at Barclays.

Also weighing on the Aussie Dollar earlier was a weak performance by base metal prices.

Base metals prices were mostly lower overnight, copper (-0.5%) declined on reports the global copper market slipped to into deficit to show a 17,000-tonne shortfall. Lead (-0.5%), aluminium (-0.7%), zinc (-0.3%) and nickel (-2.5%) all declined.

Commodity prices are currently recovering in the positive market environment and are in turn dragging the AUD higher.

"China’s HSBC/Markit flash August PMI rose back into expansionary territory to 50.1, well above consensus expectayions of 48.2. This provides further evidence of stabilisation in the Chinese economic backdrop and has helped support growth sensitive currencies, like AUD and CAD and commodity prices, copper is up 1.7% since yesterday’s close," says Camilla Sutton at Scotia Bank.

New Zealand Dollar: A Star Under-Performer until now

new zealand dollar latest The New Zealand Dollar (Currency:NZD) had also felt the heat earlier today but is coming off recent lows as currency traders take profit on recent moves and push the NZD up alongside the AUD:

  • The Pound to New Zealand Dollar exchange rate is marginally lower at 1.9944.
  • The Euro to New Zealand Dollar exchange rate is 0.2 pct higher at 1.7064.
  • The New Zealand Dollar to US Dollar exchange rate is 0.3 pct higher at 0.7824.

Over the past 24 hours "the NZD was a standout underperformer, possibly reflecting the ongoing fall-out from the introduction of tight macro-prudential policy measures earlier this week," say ANZ Research. We would expect the hangover of this issue to cap any major gains.

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