"It now looks more clear the last quarter print was the bottom of the cycle. It keeps the pressure on the Reserve Bank to hike by March."
- Imre Speizer, market strategist at Westpac Bank in Auckland
Following a better-than-expected inflation data earlier this month, a report by the Statistics New Zealand showed nation's trade gap shrivelled last month on the back of strong exports that more than doubled, while imports slipped sharply. September's deficit stood at $199 million, down from a revised gap of $1.23 a month earlier, while the annual deficit improved as well, hitting $1.54 billion from $2.1 billion in August. The main contributors for such optimistic figures came from exports receipts, which soared 17% on last year's levels to $3.8 billion, $0.5 billion higher than in the prior month. At the same time, imports slipped 1.2%, totalling $4.0 billion. The last but not least is a stronger demand for New Zealand-made goods, which surged 74% annually.
Despite a pickup in exports, domestic currency is still considered by the RBNZ as an overvalued, as it advanced 1.9% in September and was 4.7% higher from the same month a year ago. This fact puts additional pressure on exporters as their goods become less competitive globally. However, demand from China, which took $815 million of goods, still remains strong even despite strong currency. Nevertheless, according to the RBNZ Governor Graeme Wheeler kiwi's strength is causing headwinds for the nation's trade sector. The RBNZ signalled about the potential key benchmark interest rate hike next year, suggesting the currency may appreciate even further.
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