Dollar weakness amid an uncertain U.S. economic recovery has driven the New Zealand currency to within one cent of a record high against the greenback as the gap in interest rates widens.
Borrowing in dollars to buy the kiwi — a strategy known as the carry trade — has returned 3 percent this month, the most among major currencies. A dollar gauge fell to the lowest in five weeks after data yesterday showed the economy contracted more than estimated, supporting the Federal Reserve’s commitment to ultra-low interest rates. The Reserve Bank of New Zealand was the first central bank in a developed nation to exit record-low rates this year, raising borrowing costs three times.
“Whenever there’s a broad-based dollar selloff, the kiwi tends to outperform.” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “If you’re looking for carry, the kiwi is the go-to currency because of our hawkish central bank.”
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.