Forex Blog: Currency Trading News & Analysis.

August 3rd 2005

Rising US rates could impact NZD

The New Zealand Dollar (NZD) continues to perform well, no doubt helped by a federal interest rate of 6.75%, which is currently the highest in the developed world. Investors in search of (relatively) risk- free returns have entered New Zealand en masse, sending the NZD to higher levels. This has occurred in spite of New Zealand’s lackluster economy, which is expected to grow by only 2% annually over the next couple of years. However, as US interest rates rise, the US-New Zealand interest rate differential, which in the past has been a source of NZD strength, narrows proportionately. This trend, combined with the prospect of falling rates in New Zealand, has led currency strategists to reevaluate their expectations for the NZD. Bloomberg news reports:

“With a declining yield spread against the U.S. we continue to favor selling rallies in the New Zealand dollar,” said a currency strategist at Bank of New Zealand.

Read More: N.Z. Dollar May Fall on Speculation Yield Advantage Will Narrow

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Posted by Adam Kritzer | in Central Banks, Major Currencies | No Comments »

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© 2004 - 2023 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.