The NZ Dollar may fall on weaker global growth, which will also reduce the demand for the currencies of the nations who take advantage of high commodity prices and high yields. Such a country include New Zealand's closest neighbour Australia, whos interest rate has hit a 12-year high of 7 percent after the Reserve Bank of Australia (RBA) raised rates by 25 basis points last month. The Group of 7 (G7) meeting in Tokyo have indicated that further rate cuts and tax reductions will me needed in order to boost the slowing world economy which is already in the midst of a recession. The NZ Dollar may fall on the back of a recession as it may cause a reduction of investment into higher yielding currencies. ''As worries about the health of the global economy escalate, we'd expect high-yielding currencies like the New Zealand dollar to under perform relative to safe haven currencies like the yen,'' said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. New Zealand's interest rate is the second highest in the world among the AAA rated nations. Its economy has already begun to slow down, with the housing market growing at a record slow pace, rising at 8.9 percent in January from a year earlier.
In forex trading, the NZ Dollar may fall later this year amidst a slowing world economy. Currently, it traded at 78.80 US cents compared with a previous trade of 78.85 US cents. Against the Japanese Yen, it traded at 84.53 Yen from 84.60 Yen. Other currencies posting possible long term falls include the Philippine Peso.
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