New Zealand Dollar Positioned to Outperform Again
By all accounts, last week’s Kiwi Dollar rally seems counterintuitive. Indeed, the central bank apparently delayed the onset and scope of monetary tightening while global stock exchanges slid 2.2%, the largest weekly drop since last five of January. And yet, the currency shrugged off the ominous backdrop that would have been expected to sink a high-yielding, carry-sensitive currency. The answer, it seems, lies in the idea that NZD is simply the least worrying out of a troubled bunch, at least for now.
New Zealand is fairly insulated from the sovereign debt fiasco plaguing Europe, a problem that clearly runs deeper than just Greece and will not be resolved by the bailout that the EU and IMF are to announce over the weekend The pace of its economic growth has steadily increased since it emerged out of recession in the second quarter of last year, a pattern that is expected to have continued in the first three months of 2010 while that of the United States (and likely its perennial dependent, Canada) slowed over the same period. And finally, all waffling aside, the RBNZ is set to begin tightening monetary policy while its counterpart in Australia is plainly saying that its rate hikes are all but finished. All of these considerations seem no less relevant in the week than in the previous one, hinting New Zealand Dollar gains are likely to continue for the time being.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.