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Watch Out For Falling Kiwis? Here's Why

Christchurch, New Zealand
Peter Adams | The Image Bank | Getty Images
Christchurch, New Zealand

The New Zealand dollar's rally seems to have run its course.

It's been hard not to love the New Zealand dollar, at least until recently.

As a proxy for risk, it had a great run after European Central Bank President Mario Draghi gave markets a shot of confidence last month.

But that is so last month. "Since the risk rally began with strong comments from ECB President Draghi, NZD has outperformed the other commodity currencies (AUD, CAD, NOK). With NZD up 2.9 percent, NOK up 2.7%, AUD up 2.65% and CAD up 2.4%," Camilla Sutton, chief FX strategist at Scotiabank, told me. "NZD might have gotten a bit ahead of itself."

It's not just a relative value issue, though. New Zealand's latest employment report disappointed investors, as did China's latest trade data.

And then there are the market rumors about the Swiss National Bank. The Swiss have been snapping up euros and selling francs in a bid to keep their currency in check - and now there is talk that they may be trying to diversify their reserve holdings.

The chatter generally involves the Canadian dollar, the Australian dollar, and the Scandinavian currencies, Sutton says, but "I haven't heard this rumor about NZD, which might explain part of the lag."

There you go. Three reasons to take cover - for now, anyway.

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