Strong Kiwi hurting trade

Bill English says the New Zealand dollar is too strong and is posing a challenge for exporters. The kiwi has been the best-performing currency this year, but our finance minister believes it’s a bit too high. “It makes it difficult for our economy to rebalance,” says the Finance Minister. The NZ dollar continues to climb while traders hedge their bets on the Reserve Bank raising interest rates next month. Central bank Graeme Wheeler lifted the official cash rate by one quarter point to 2.75 per cent on March 13 and has signalled further increases as inflation pressures build. The kiwi touched 91.87 Australian cents overnight, its lowest level since Feb. 20. The local currency was at 92.05 Australian cents at 8am in Wellington from 92.38 cents at 5pm yesterday. The New Zealand dollar edged lower to 86.78 US cents from 86.82 cents yesterday. The local currency advanced to 88.32 yen from 88.20 yen yesterday and was little changed at 51.87 British pence from 51.88 cents. The trade-weighted index was unchanged at 80.45. “A hawkish central bank has driven the New Zealand currency’s gains,” says Nick Bennenbroek, head of currency strategy at Wells Fargo Bank NA in New York. “Given the sturdy momentum of the economy, a series of rate hikes looks likely. We anticipate further gains in the currency.” Government data on March 20 shows our gross domestic product increased 3.1 per cent in the fourth quarter from a year earlier, marking the second-straight period of growth exceeding three per cent. Shipments of milk powder and butter to China are helping fuel growth. Exports surged 17 per cent in February from a year earlier, which was this country’s biggest trade surplus since April 2011. “We’re reasonably confident that we will enjoy growth of around three per cent over two to three years,” English says. “The challenge for us is to sustain it beyond cyclical factors.”