The weakest dollars are antipodes – Commerzbank

So far this week, neither the Australian dollar (AUD) nor the New Zealand dollar (NZD) have been able to benefit from the general weakness of the US dollar (USD), with both currencies weakening slightly over the week, FX Strategist at Commerzbank , Volkmar Baur, notes.

AUD to suffer more than NZD

“Both appear to be affected more by weak Chinese data than US recession fears. A look at the export data shows why. About 35% of all Australian exports over the past 12 months went to China, while the figure for New Zealand was still around 25%. A prolonged slowdown in China is therefore likely to affect both countries – although over time it should become clear that Australia will suffer more than New Zealand.”

“This is because not only is China’s share of total exports greater in Australia than in New Zealand. The composition also suggests that Australia will be hit harder. Because while New Zealand mainly exports food, iron ore alone accounts for 26% of all Australian exports – about 85% of which are shipped to China. Together with coal, of which about 11% also goes to China, these two commodities account for about 42% of Australian exports.”

“With Chinese iron ore and coal stocks recently at very high levels, Australian exports could remain under pressure in the coming months. Especially if the housing crisis in China continues. This is likely to weigh more heavily on the AUD than the NZD.”