Kiwi dollar sets off on a bull run

The New Zealand dollar has reached a five-year high against its Aussie counterpart.

The New Zealand dollar, also known as the kiwi, is on a roll. It has reached a five-year high against its Australian counterpart, the Aussie, and now buys 89 Australian cents.

It's largely a question of interest-rate expectations. Solid growth, fuelled by strong consumption and a construction boom based on repairing the damage after the Christchurch earthquake of 2011 suggests that the next move in interest rates in New Zealand will be up.

Another sign of economic health is that net migration to New Zealand is running at a four-year high. In Australia, interest rates could fall soon.

One problem is that trade with China accounts for 5% of Australian GDP, and Australian metals exports will be less sought after now China is trying to promote consumption rather than investment in infrastructure, says Delphine Strauss in the FT.

New Zealand's commodity exports comprise 3% of GDP but are mostly agricultural, so it should continue to benefit from Chinese consumption. The Chinese boom in infant formula brands looks set to boost milk prices for New Zealand producers.

Bank of America Merrill Lynch's Adarsh Sinha expects New Zealand's interest rates and commodity prices to stay higher than Australia's. BNP Paribas reckons the bull run in the kiwi dollar is set to continue.

Recommended

The currencies to bet on this year
Currencies

The currencies to bet on this year

The US dollar could be set to weaken this year, while the euro, Canadian dollar and the Swiss franc could be good bets for optimistic traders.
17 Jan 2020
Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020
Jim Reid: an ”age of disorder” is looming
Global Economy

Jim Reid: an ”age of disorder” is looming

The world is headed for a new “age of disorder”, says Jim Reid, the veteran multi-asset strategist at Deutsche Bank, in the latest edition of his annu…
21 Sep 2020
The charts that matter: China’s recovery bolsters the yuan
Global Economy

The charts that matter: China’s recovery bolsters the yuan

China's strengthening currency is a sign of confidence in the country's economic recovery. John Stepek looks at the yuan chart, and all of the others …
19 Sep 2020

Most Popular

The rising dollar is proving bad news for most other assets – will it last?
Investment strategy

The rising dollar is proving bad news for most other assets – will it last?

Precious metals, stocks and pretty much every other asset has taken a tumble as the US dollar strengthens. Dominic Frisby looks at how long this trend…
23 Sep 2020
The electric-car bubble could get an awful lot bigger from here
Renewables

The electric-car bubble could get an awful lot bigger from here

The switch to electric cars is driving a huge investment bubble. But that’s not necessarily a bad thing, says John Stepek. Fortunes will be made and l…
24 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020