NZD at top levels

I was looking at NZD fundamentals, it is interesting to note that NZD/USD has reached such a level which is difficult to maintain.

New Zealand is a small country with a limited economy. It mainly exports dairy products. Over the last few months due to high NZD the exports have dried out. No sane person will be willing to pay such a high cost for products you can purchase from other countries at less than half the cost. The difference between imports & exports is becoming huge, leading to negative trade balance, negative current account, which is difficult to sustain. Businesses are closing down in NZ. Inflation is rampant. Adding to this US economy is cooling which is further going to put strain on countries like NZ & AUD.

Institutions are pushing the price of the NZD high as they seem to be on a spree of mindless buying. I worry for people who have trusted their money to these so called fund managers who have bought NZD/assets in loads without paying attention to the fundamentals. As the fundamentals play out within the next few days/months, these assets are going to depreciate significantly.

I recall few months back when NZD/USD was around 69. NZ finance minister was jumping up & down that NZD is too high; haven’t heard anything from him lately when the NZD is nearing 75. The same is true for EU ministers they were going crazy with speeches that EUR is too high. EUR/JPY is unacceptable. The EUR/JPY level then was around 155. Now it is 163 & every thing is rosy. This clearly goes to show you that these ministers have limited knowledge of fundamentals & the rhetoric is all hollow.

Please be on the watch out for next week. NZD dollar is just barely hanging by the thread. Its reversal is inevitable & could be a violent one. Don’t get trapped.

Forexfactory