The Kiwi Just Got Squashed!

From Chuck Butler, President of World Markets at EverBank

What's Happened:

The Reserve Bank of New Zealand (RBNZ) did indeed lower their Official Cash Rate (OCR) yesterday afternoon. They dropped rates by 25 basis points.

What I Say:

Uh oh! I've been saying this for a while: New Zealand has a debt problem that in percentage terms is larger than the U.S. (of course the state of Texas could have a larger GDP than N.Z. I think).

But in percentage terms, it's horrible. The markets all swept this under the rug, because of the sensuous allure of higher interest rates here.

Well, when the interest rate differential begins to go away, the ugly stepsister gets brought out to the front of the house for everyone to see, and gawk at.

That's what will happen here, and is already happening, as the kiwi gets hammered after the announcement yesterday.

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