The Japanese yen was in a favorable position against most currencies because it is least exposed to the risks associated with the trade war between China and the United States. The New Zealand dollar, by contrast, is one of the most vulnerable commodity currencies and the situation is exacerbated by the economic situation in New Zealand. This significantly affected the rate of the NZD, which fell to its lowest level since January-October of 2016.
The latest data on the New Zealand economy showed continued negative trends. The latest data on exports and imports exceeded expectations of the market: imports grew by 21.3% in July, while exports grew by 15.8%. The excess of imports over exports leads to a negative trade balance for the second month in a row. The only positive thing is that the July deficit was only NZD 143 million, while economists had expected the trade deficit to increase by NZD 400 million.
The situation in Japan is traditionally stable. The only negative factor for Japan is a very low level of inflation, which slows down the growth of the Japanese economy. This is reflected in the consumer confidence index, which fell for the fourth month in a row and amounted to 43.3 pips in August. Inflation in July was only 0.9%, which is higher than expected on the market, but considered to be twice lower than the target level set by the Bank of Japan. The manufacturing PMI index in August rose to 52.5 pips, retreating from the last month's minimum level.
The downtrend in favor of the JPY will continue in the medium term. At the moment, after the completion of the price correction, we can expect a further decline in the cost of the NZD, up to 72.1 JPY. Deals on the trend can be considered as the most effective in the near future.
