RBNZ’s false start leaves Kiwi vulnerable

Current valuations fully reflect the good things about New Zealand, they do nothing to factor in developing risks. House price growth has created a bubble in Auckland and its surrounds while strong domestic demand has raised concerns about credit growth and inflation. Consequently the RBNZ has started tightening monetary policy. The dairy sector has become bloated too, both in terms of size and leverage. It is vulnerable to higher interest rates and falling milk prices. September’s general election is another pressure point. The New Zealand dollar is highly vulnerable to such shifting sands and looks a good (short) hedge for long positions in diverse assets (including equities) that are being driven by global liquidity.

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