One of the highest yielding currencies may hike rates yet again. Over the the past thirty days the New Zealand Dollar has gained a whopping 500 pips against the Japanese Yen with speculation the new interest rate spread will be 7.25% ( Current yeilds: Yen .25% – NZD 7.25% with expectations to rise to 7.5%)
Kiwi hike again??
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The view of the carry trader is that despite NZ central banker’s best efforts to stem the rise in the kiwi currency, its having the most attractive interest rate of any industrialized nation makes it a perfect long. Even if that rate is coupled by the largest current account deficit as a percentage of GDP, risk appetite and yield-hungry speculators appear for the moment to be winning the tug of war with NZ government officials.