NZ dollar on the slide

Source:BNZ

With the downgrade of the at the end of September the NZD/USD will remain volatile and the BNZ reckon that the price range for the NZ$ will remain between 0.7608-0.8573.

Standard & Poors – long-term foreign-currency credit rating – from AA+ to AA
Fitch – long-term foreign-currency credit rating – from AA+ to AA
Mooody’s – long-term foreign-currency credit rating – remains at Aaa

What is affecting the NZ$?
* concerns about European Sovereign Debt
* Decline in dairy prices – although a weaker NZ$ against the US$ can actually increase prices in NZ$ terms (milk powder is traded in US$).
* Investors now moving to the safe haven of US Treasuries – Treasury securities are the debt financing instruments of the United States Federal government, and they are often referred to simply as Treasuries. There are few alternative safe-haven assets out there that can match the depth and liquidity of the Treasury market

However with still relatively higher interest rates than most other developed nations (see table) there is the chance that the NZ$ will appreciate. Today the Reserve Bank of Australia (RBA) held its target cash rate at 4.75% as current global economic conditions have put the brakes on growth and inflation.

2 thoughts on “NZ dollar on the slide

  1. Colin Bowern

    With some countries using lower interest rates to stimulate the economy through borrowing do you see the higher prime rate in NZ as a hindrance to getting the economy moving? My wife and I are researching a move from Canada to New Zealand and one of the things I am watching is the economic outlook (even though we’re both in high demand industries – healthcare and IT).

    Reply
  2. Mark Post author

    Yes high interest rates will have an affect on growth – furthermore as an export driven economy we don’t want a stronger dollar. Although we have been downgraded by the credit rating agencies the economy is in not bad shape relative to those in Europe and the US.

    Reply

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