by Damian -
The New Zealand Dollar Exchange Rate soars after rate hike. The Reserve Bank of New Zealand had little choice but to hike interest rates last night after the NZ Housing Market continues to overheat.
The NZ housing Market has been in a boom cycle for thew last fear years fueled by lower interest rates, demand after the wellington earthquakes and overseas buyers.
The RBNZ expects now for the NZ interest rates to rise by 2% over the next two years as the terms of trade improve.
My only concern for the New Zealand Dollar is that it could again be used as a “carry currency” (sell a low interest rate currency to buy a high interest rate currency) as foreign investors look for yield especially in safe economies like New Zealand.
This will put pressure on exports and locally produced goods in favor of cheap imports.
You only have to look what is happening to the Australian Car Industry which will be extinct in 2016.