Kiwi no longer favorite bird as major investors sell
The New Zealand dollar, the best-performing currency in the past decade, is losing support from the world's biggest investors, who are convinced that interest rates and commodity prices will fall.
BlackRock Inc, which oversees $1.4 trillion, and DWS Investment GmbH, part of Germany's largest bank, said they sold the New Zealand dollar as home sales slumped to a 16-year low in April and employment fell the most since 1989. Citigroup Inc, the fourth-biggest foreign-exchange trader, said the so-called kiwi will get "roasted" after a 3.5 percent drop in the past two months. Lehman Brothers Holdings Inc, the fourth-largest US securities firm, forecasts a 17 percent decline by year-end.
After the nation's central bank raised interest rates 13 times since 2004, traders are betting it will be the world's most aggressive in cutting borrowing costs over the next 12 months, dimming the allure of New Zealand's fixed-income assets and the currency needed to buy them.
"The New Zealand economy looks to be in pretty dire shape," said Stephen Miller, a money manager in the Sydney office of New York-based BlackRock. "The central bank might cut, and cut aggressively. The New Zealand dollar looks vulnerable."
The New Zealand dollar fell 0.3 percent to 77.21 US cents at 4:46 pm in Wellington. The currency of Australia, New Zealand's biggest trading partner, reached a 24-year high of 95.71 US cents.
The kiwi, named after a flightless bird native to New Zealand and depicted on the NZ$1 coin, has depreciated 6 percent since reaching 82.13 US cents on March 14, the highest since it was allowed to trade freely in 1985. The currency has fallen 6 percent in the same period to NZ$1.2368 per Australian dollar.
BlackRock predicts the currency will drop to 73.50 US cents by year-end and holds a "modest" short position, or bets that it will fall, Miller said. Fortis Investments, part of Belgium's biggest financial group, forecasts a decline to 70 cents in six months and has been short since March, according to Willem Klijnstra, a London-based senior portfolio manager at the firm, which oversees the equivalent of $465 billion.
"The kiwi is overvalued," Klijnstra said. "The kiwi is seen as a commodity currency, and commodity currencies are now more at risk because of the global slowdown."
The Reuters/Jefferies CRB Index of 19 commodities including coffee and corn surged 37 percent in the past 12 months.
Agencies
(China Daily 05/20/2008 page21)
