Ireland and New Zealand are highly correlated.

Both are small island nations unduly influenced by economically powerful neighbours, sharing similar populations (4.4 million for NZ, 4.7 million for Ireland) and a predilection for binge-drinking.

And here's another correlation to add to the mix: according to a UK-based hedge fund manager, as reported by Bloomberg last week, NZ is "like Ireland in 2007" - due for a massive hangover.

Citing a report authored by SLJ Macro Partners' Stephen Jen, an ex-International Monetary Fund staffer, and Fatih Yilmaz, the Bloomberg story is a sobering contrast to NZ's 'rock star' image promoted elsewhere.


New Zealand, Jen and Yilmaz point out, is an Irish-ish "growth model based on debt and credit, low savings rates, and current-account deficits".

Unlike the post-2007 scenario in Ireland (Republic of), which is part of the Eurozone, if the rest of the world suddenly decides to downgrade New Zealand's rock-star status to junkie level, the shock will be transmitted through our currency.

Consequently, Jen and Yilmaz conclude that, despite some "temporary cyclical factors" boosting the NZ currency "there are serious structural demerits that will one day weigh on the kiwi".

"From a medium-term perspective, we see considerable downside to the kiwi dollar, in contrast to the overwhelmingly positive prevailing view in the markets," the SLJ Macro report says.

The report also talks down New Zealand's economic performance compared to its trans-Tasman neighbour.

"New Zealand's terms of trade improvement is significantly lower and less impressive than that seen in Australia," Jen and Yilmaz.

To be sure, there are plenty of other currency analysts who disagree.

For example, a report published by Credit Suisse in Australia late in January predicted continuing "monetary and economic divergence between Australia and New Zealand... driving AUDNZD lower in 2014".


"We think it is premature to call a bottom in AUDNZD," the Credit Suisse report says.

Which currency expert do you trust? Perhaps none of them - a position that may be confirmed if the just-announced investigation of foreign exchange benchmarks by the Financial Stability Board (FSB) digs up any dirt.

"Recently, a number of concerns have been raised about the integrity of foreign exchange rate benchmarks," the FSB said in its release last week. "The FSB has consequently decided to incorporate an assessment of FX benchmarks into its ongoing program of financial benchmark analysis."

The New York times reported last Friday that, in a series of possibly-correlated career moves, "senior foreign exchange executives at several banks have decided to step down and pursue other interests in recent weeks".