Relief from rising dollar

Investors with money in unhedged international assets such as shares will have taken a hit from the rising dollar recently.

"(The rising dollar) has certainly chopped quite a bit off offshore equities in recent months," according to Bank of New Zealand Investment management manager of investment strategy Geoff Mason.

He says the dollar has risen about 4% in March, while international shares have gone up by the same amount. The net result is that one has cancelled out the other.

The good news is that there should be some respite in the next few months.

Mason is predicting the New Zealand dollar will fall back because the country's current account deficit is likely to deteriorate, interest rates are rising and economic conditions are getting tougher. This is particularly so in the diary sector, where commodity prices have fallen 30% since their highs reached in August 2001.

Overall Mason is 'enthusiastic' about international shares going forward, mellow on New Zealand equities and unattracted to international bonds.

But despite his lack of enthusiasm for global bonds, Mason is predicting that they will still provide investors with returns of 3 to 5% gross during the year. That though is less than half the 10-12% he is predicting for shares.

Mason bases his positive sentiment for world shares on economic events in the United States. He says that data coming out of that economy is very supportive of a recovery, and there have been "very encouraging signs on productivity."

He says all eyes will be on the March quarter reporting session that starts at the end of this month. Results will give a good indication of how robust the US recovery really is.

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