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NZ$ ends the month on a high
In final New York and London trading for May 2009, the kiwi dollar surged higher as near-term sentiment improves.
The currency ended over US$0.64, and the trade-weighted index (TWI) finished over 60.0. For the US$, this represents the highest daily rate since early October 2008, a nine-month high. The TWI was last at these levels in late October 2008.
There were gains against all our other trading-partner currencies. Against the Aussie dollar, the kiwi finished over AU$0.80. The last time it was above 80 was mid-April. Against the Japanese yen it finished over JPY61, this being the highest since late October 2008. Against the Euro, it settled at EU0.454, its highest level since November 2008.
Part of the strength of the kiwi appears to be from a market belief that the confirmed S&P credit rating and a 'sensible' NZ Government budget will set the local economy on a track to survive the current recession better than most. But the currency faces many challenges, including high uridashi maturities, and a domestic economy that is very vulnerable to rising long-term interest rates.
Local exporters, and especially the dairy industry, will be hard hit by a rising currency. Reportedly, Fonterra has low currency cover at this time of their selling season.
This is definitely a more
This is definitely a more sustainable level. It may not help our exporters, but neither does artificially low exchange rate, if we expect to compete in the long term. I guess it will mean the interest rate will drop again, but that isn't going to make any difference.