Wednesday, April 28, 2010

The NZ$ vs the £ Sterling... correction time?

The NZ$ is at a record high against the British Pound. Travelex are currently selling NZ$2.05 for £1. This is almost a record low for the Pound against the dollar.

City AM is arguing that a long run correction will be on the way, and the right thing to do is long selling of the kiwi vs the sterling. In other words, the Pound is likely to rise after the election (assuming the uncertainty built into the price is corrected), and that the NZ$ will be on a track to fall because of pressure from the Reserve Bank of NZ.

What does this mean for kiwis in the UK? Bring your money here. The pound is unlikely to ever be this cheap against the NZ$. The NZ$ strength is driven in part by the relatively high interest rates, but also naive belief by some currency traders that the NZ$ has parallels with the $A. City AM dismissed this link a few months ago, as the A$ is driven by rising commodity prices around minerals. The NZ economy is not driven by this, and in fact has a tourism sector being hit by the drooping Pound, Euro and Yen.

Meanwhile, kiwis wanting an overseas holiday should book trips now - it will never be this cheap to visit the UK and Europe, whilst the pound remains low and the Euro gets damaged by the PIIGS (Portugal, Italy, Ireland, Greece, Spain). Unless, of course, you believe in reducing CO2 emissions in which case keep yourself on NZ soil or else you can be readily accused of blatant hypocrisy.

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