LAST week, the New Zealand Dollar was a victim of recent developments in the Eurozone, as well as subject to poor reviews from the International Monetary Fund, and a hike in the price of the Nations’ export products. The kiwi opened at 1.836 against the Pound on Monday the 18th, before touching an intra-week low of 1.843 on Wednesday.
The suggested tax on all deposits in Cyprian accounts drove investors from all perceived risky assets, fearing the deposit tax may set a new norm for struggling economies. Bloomberg reported Peter Dragicevich, of CBA’s thoughts on the matter: “Aussie, kiwi opened this week’s trade quite a bit lower. Whilst there are no direct linkages between Australia, New Zealand and Cyprus, the currencies are reacting to changes in market sentiment. There could be some fears in the market that if another sovereign required a bailout, they may tax the deposits of that particular country as well.”
The IMF commented on the state of the Kiwi, saying that although it was affected by the Euro crisis, the currency remains over-valued: “New Zealand’s exchange rate is over-valued by about 15 percent and attempts to lower it through intervention would be futile against rising demand from global investors”. An overvalued currency may give rise to a number of problems for residents, however this is not likely to deter foreign investors from parking their cash in the perceived safe-haven.
Domestically, the most widespread drought in New Zealand in 30 years drove whole milk powder to an all-time high, which may influence supply from the worlds’ largest exporter of the product. Ahead, the currency is likely to take direction from Euro developments, as well as domestic factors surrounding the drought.
Composed by Jesse Crooks
Exchange rates as of 08h00 GMT, 26th March 2013
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