New Zealand Dollar falls and may not recover
Interest rates for New Zealand Dollar at UOB have fallen from 7.6% by 1%. Interestingly, DBS is offering better rates at 7.6%. Usually, UOB rates are better than DBS rates. Anyway, this is still way better than the less than 1% offered for a normal fixed deposit. Previously, my NZ dollar fixed deposit was at 7.3% before I managed to change to a slightly better rate a month later.
The NZ government does not want to hurt the exporters, but with the increase in dairy prices, they are still doing well.
According to Bloomberg, the NZ finance minister has said that the NZ dollar has reached its peak and will continue to decline. This does not look very good because the high percentage in interest rates may not offset the fall in the value of the NZ dollar, when it is sold against the Singapore Dollar. Thus, you may want to reconsider buying NZ dollar now if you had not earlier done so.
Currently, the key rate for NZ dollar is 8.25%, which is at a record high. Based on this, it is a little puzzling that the interest rate at the bank is not as attractive.
Given the uncertainty of the NZ dollar, the breakeven rate is S$1.13. Currently, DBS offers it at $1.15, which is lower than it was at its peak. Hence, if the NZ dollar falls beyond that, it might be wiser to keep the fixed deposit in NZ dollars until it increases again, unless it falls beyond what you have bought the dollar at.
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