New Zealand Dollar May Be Overvalued Says IMF

The New Zealand fell today, scrapping two sessions of the advance against the US dollar, as the International Monetary Fund said that the currency too overvalued.
The IMF said that the New Zealand currency is 20 percent above the estimated equilibrium exchange rate. The high prices of the kiwi are partly caused by the large positive interest rate differential. The differential may be reduced as major banks may perform tightening in the future.
New Zealand’s residual cash deficit in the nine months ended 31 March 2011 was at NZ$12.4 billion. That’s NZ$102 million above the forecast. Analysts expect the deficit to wide even more.
NZD/USD fell from 0.7953 to 0.07909 today as of 7:13 GMT, posting the intraday low of 0.7888 during the trading session. EUR/NZD rose from 1.8050 to 1.8095 and NZD/JPY decline from 63.89 to 63.73, after reaching the low of 63.43 earlier.

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