Tuesday, February 26, 2008

New Zealand Dollar 22 year high looms



Written by Kathy Lien, Chief Strategist and John Kicklighter, Currency Analyst for DailyFX.com

Extending its impressive rise for the eighth consecutive trading day, the high flying New Zealand dollar has hit a 22 year high above 81 cents. This is the first time that we have seen the currency trade at these levels since it was freely floated in 1985 and the most bizarre part of the move is the fact that it was not driven by any economic data or news. Compared to the rest of the world, the New Zealand economy is holding up well but unlike Australia, there are chinks in the armor. A drought in much of New Zealand has spurred a dairy price boom but in the long term, droughts pinch supply which hurts the economy more than it benefits it. With no economic data released in over a week, yield, risk appetite and commodity prices have been the primary catalysts for the latest move. Can the New Zealand dollar sustain its rally beyond a 22 year high? Will the RBNZ intervene again?

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