Home Forex Market Analysis The New Zealand Dollar Gains 2.50% Against the Japanese Yen in the...

The New Zealand Dollar Gains 2.50% Against the Japanese Yen in the Weekly Outlook

The New Zealand Dollar Gains 2.50% Against the Japanese Yen in the Weekly Outlook
  • NZ trade balance increased to NZ$ 469 million from a prior reading of NZ$ 414 million buoyed by high vehicle import prices. 
  • There was an 8.5% increase in exports with exports to Japan surging 3.5%.
  • Tokyo’s core CPI rose 0.0% while services PPI gained 1.5% in May 2021 (YoY).

The NZDJPY pair gained 2.51% in the week ending June 25, 2021. May 2021 saw exports increase 8.55% to NZ$5.87 billion from NZD 5.40 billion realized in April 2021. The trade balance also increased to NZ$ 469 million from a prior reading of NZ$ 414 million. While this monthly trade balance would work negatively on the New Zealand dollar, it was offset by a lower annual trade balance at -NZ$60 million.

New Zealand’s GDP in Q1 2021 gained 1.6% after dropping 1.0% in Q4 2020. Auckland’s 10-day lockdown was inadequate to initiate the economic decline. The GDP was boosted by businesses, service and health sectors. 

In what could affect New Zealand’s tourism industry, NZ paused the travel bubble with Australia for 12 days due to the surge in coronavirus cases in the latter. New South Wales (NSW) recorded 5.725 new cases as of June 25, 2021, with up to 54 deaths on record in the Australian state.

Highest car import value 

May 2021 saw the import value of cars rise to the highest level boosted by New Zealand’s recovery from Covid-19. 

Monthly import value of passenger cars

Monthly import value of passenger cars

The import value of passenger vehicles rose from NZ$435,530,929 in April 2021 to NZ$567,241265 in May 2021. On an annual basis, the import value rose 254.48% from May 2020. Car imports from Japan surged by NZ$115 million (the highest gainer among NZ major partners) while the EU was up NZ$86 million. It was followed by the US at NZ$54 million. 

There was an 8.5% increase in the export of goods representing NZ$461 million to NZ$5.9 billion. New Zealand had high export figures among its major trading partners, apart from Australia (at -13% of -NZ&92 million). Export to Japan increased 3.5% by NZ$15 million while imports soared 103% at +NZ$157 million. While this trade balance was highest between NZ and Japan, it was offset by the declining annual balance (at -NZ$60 million) that favored the NZD. 

Inflation data

Japan saw an increase in inflation data with Tokyo’s core CPI (less fresh food prices) rising 0.0% (YoY) from a previous reading of -0.2%. It beat forecasts at -0.1% with the index settling at 101.8. 

Japan’s Core CPI

Japan’s Core CPI

Food prices inched up 1.4% to 105.8 but were offset by a decline in education prices at -7.8% (93.2) due to the imposition of restrictions on social gatherings. 

Japan’s services PPI (among producer firms) gained 1.5% in May 2021 (YoY), for the third consecutive month since March 2021. According to the Bank of Japan (BoJ), fees for television adverts soared 35% in May 2021 (YoY) as most people embraced stay-home measures. High demand from China and fuel prices caused a 34% spike in freight costs. Investors are, however, watching to see whether the increase in wholesale prices will cause a subsequent increase in consumer inflation. 

With the Olympics beginning on July 23rd, 2021, the Japanese government announced that it would preserve some emergency measures despite easing Covid-19 restrictions. It planned to limit the emergency to July 11, 2021, to allow for a comprehensive health assessment before the games.  

Technical analysis

The NZDJPY pair formed a resemblance of a flag with the downtrend visible from June 1, 2021. A quick rise in price is seen moving towards 79.142 as a bullish pattern continues after the pattern.

NZD/JPY chart

There is a rise in buying volume with the 14-day RSI at 50.57. We may see a sharp reversal as the price drops to 75.874.


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