The New Zealand dollar lost its previous strength, falling yesterday and extending its decline today. Domestic fundamentals still look very favorable for the currency, and this means that reasons for the drop should be found outside of the country. The most likely reason for the drop is the general risk-negative sentiment on the Forex market.
Traders were in a pessimistic mood as news from Europe were poor, and this, coupled with signs of economic slowdown in China, means that investors prefer safer assets over riskier ones. The NZ dollar, which were poor, fell as a result. The currency headed to the second weekly drop versus the Japanese yen, but was actually able to gain on the euro for the third week.
Domestic fundamentals remained supportive for the kiwi. Bill English, the Minister of Finance, said in his budget speech yesterday that “New Zealand is in a good position” and also stated:
New Zealand is one of the first developed countries to return to normal economic conditions, with a recovery led by the private sector.
He added:
On most indicators that matter, weâre moving forward as a country.
The seasonally adjusted Performance of Manufacturing Index dropped from 58.0 in March to 55.2 in April, yet the report said:
Despite a dip, New Zealandâs manufacturing sector remains in solid expansion.
NZD/USD declined from 0.8641 to 0.8634 as of 20:40 GMT today. EUR/NZD was flat at 1.5860 after rising to 1.5910, while NZD/JPY went down from 87.76 to 87.67.
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