The New Zealand dollar extended its rally today, making Alan Bollard, the governor of the Reserve Bank of New Zealand, unhappy as he worries that the strong currency impedes the economic recovery.
The currency’s appreciation in 2009 already decreased the exports, which make up 30 percent of the nation’s economy. Bollard predicted that the current account deficit would rise from 3.3 percent of gross domestic product as of March 2010 to 7.2 percent by March 2013.
The governor expressed his concern for the effect of the strong currency on the investment incomes:
The trade balance has improved with strong export prices and less demand for imports. But a large deficit on the investment income balance is showing no signs of enduring improvement and the strong New Zealand dollar has not helped. It will be difficult to improve this metric as that would require us to get our net external debt position on to a downward trend and that would require a significant change in historic patterns of inward and outward investment.
NZD/USD traded near 0.6971 as of 19:31 GMT today after opening at 0.6905. EUR/NZD traded at about 1.7554. NZD/JPY traded at 63.78.
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