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Milk: It does a currency good. That certainly is the case with the New Zealand dollar, which ranks among the top-performing currencies this year in large part because of the country's position as the world's biggest dairy exporter, CME Group's Malcolm Baker wrote in a recent report.
So far this year, CME Group futures based on the New Zealand dollar are up about 9%, touching a 14-month high earlier this month. Among all currency futures, only the Mexican peso, up over 12%, has turned in a stronger performance. Trading in futures based on the New Zealand dollar was up 73% through November.
"Despite a somewhat bumpy ride, the New Zealand dollar has also been the lead dog among G10 currencies," Baker noted in a report initially posted on CME Group's OpenMarkets blog. Many investors expect further strength amid forecasts the country's economy will expand about 3.2% in 2013 from 2% this year.
The upswing in the New Zealand dollar, also known as the kiwi, comes amid stepped-up interest in so-called commodity currencies, including the Australian and Canadian dollars, which reflect global demand for raw materials such as grains and oil. Still, any economy emerging from a low-growth period faces a conundrum with a rapidly appreciating currency, and New Zealand is no exception, Baker said.