WELLINGTON - The New Zealand dollar continued to fall this week as enthusiasm for "commodity currencies" evaporated.
Late yesterday the kiwi was trading nearly 4c below its high of 56.6USc in early May. It has also lost 3c against the Australian dollar.
Economists had warned that the kiwi's sharp appreciationin April was pricing in a lot of good news which had yet to eventuate.
"In our view the recent commodity price upturn was a bit of a false dawn," said WestpacTrust chief economist Bevan Graham.
It was driven by an increase in oil prices, which reflected supply constraint by Opec rather than demand.
"Nevertheless we believe a turnaround in commodity prices is coming. The past five months have seen have seen consecutive increases in the OECD leading index, which suggests we are at the turning point for the global industrial production cycle. In the short term, however, commodity prices will continue to bounce along the bottom."
ANZ Bank chief economist Bernard Hodgetts said a factor weighing against the kiwi dollar was the current account. New Zealand's was in a more precarious position than Australia's and likely to widen to a greater extent. In addition, Australia had achieved a credit rating upgrade while New Zealand remained on negative outlook.
