Mixed Fortunes for Aussie and Kiwi

Wednesday trading so far has seen mixed fortunes for the Kiwi and the Aussie. While the Aussie lost some ground against the U.S. dollar, as the greenback rose 0.11% to 0.9439, the Kiwi made small gains, trading at 1.2303 against the U.S. dollar, or a rise of 0.02%. New Zealand's economy posted encouraging trade balance data earlier today. According to Statistics New Zealand, the country's trade balance improved to -1.8 billion NZD in the March quarter from -2.9 billion NZD in the last quarter of 2010. Smaller deficit was a result of the Christchurch earthquake, which affected the performance of foreign companies. Profits from foreign investment fell by 1 billion NZD in the period, driven primarily by a fall in the profits of foreign-owned insurance companies. The credit card data was less supportive of the Kiwi, however. According to the Reserve Bank of New Zealand, credit card spending fell from 6.1% in April (year-over-year) to 5.1% in May. On a monthly basis, credit card spending rose 0.6% in May, significantly down from a 1.8% rise in April. The New Zealand economy has been hit hard by the Christchurch earthquake earlier in the year. The recent data show that the country's economy is slowly recovering from the negative consequences of natural disasters. Australia is another country whose economy has been marred by natural disaster problems. If the recovery in New Zealand is not stellar, in Australia it seems to be even weaker. According to the Westpac Banking Corp. and the Melbourne Institute, Australia's leading index, which determines overall economic health by combining nine other indicators, fell from 0.6 in March to 0.1 in April. Both Australia and New Zealand are major exporters of commodities. As a result, the value of their currencies is closely related to the commodity prices. In today's trading, the commodity prices have been providing headwind for the Aussie and the Kiwi. At the moment, gold fell 0.06% to $1,546.95, while silver lost 0.12% of its value and stands around $36.36. Natural gas trades around $4.404, or 0.15% below yesterday's close, while copper fell 0.21% to $4.074. The only major commodity whose price rose today was crude oil, which edged 0.02% higher to $93.77. In spite of somewhat unconvincing data coming from the economies of New Zealand and Australia, both currencies made progress against the euro. The European currency fell 0.06% against the Aussie to 1.3582 and 0.15% against the Kiwi to 1.7707 as the European currency is still suffering from the effects of the Greek crisis. Traders who believe that the recovery in both Australia and New Zealand is likely to speed up soon, supported by rising commodity prices and strong growth in China, which should provide a significant tailwind for the Aussie and the Kiwi, will be interested in the CurrencyShares Australian Dollar Trust ETF FXA and the WisdomTree Dreyfus New Zealand Dollar Fund BNZ. Traders who believe in the rising value of these two currencies might think the prices of commodities might rise as well. They will be, therefore, also interested in the GreenHaven Continuous Commodity Index Fund GCC, the iShares GSCI Commodity-Indexed Trust Fund GSG, and the PowerShares DB Commodity Double Long ETN DYY. Other traders will be worried that the Chinese economy might be overheating. China is a very important trading partner for both countries. China is also the world's largest consumer of raw materials. As a result, a deterioration in China's economy can push the prices of commodities lower, which should provide a significant headwind for both the economies and currencies of Australia and New Zealand. Traders who believe in this scenario will be more interested in the PowerShares DB Commodity Short ETN DDP, the ETFS Short New Zealand Dollar Long US Dollar ETC (Sterling) ETF (SNZP), and the ETFS Short Australian Dollar Long US Dollar ETC (Sterling) ETF (SAUP).