Sean Callow, currency analyst from Westpac Bank, was on Asia Squawk Box and he gave a very specific opinion on the New Zealand dollar.

The Kiwi has been strong relative to other currencies because its short term interest rates are higher than any non-emerging market country in the world. The so-called cash rate (fed funds equivalent) is at 7%.

Callow believes that the RBNZ will not raise rates at their next meeting in December. If he is correct the Kiwi could sell off which is one part of the call.

Another reason for Callow's Kiwi bearishness is that both RBNZ chief Alan Bollard and Finance Minister Michael Cullen have both been saying the Kiwi is overvalued and that it will fall.

I have written many times about my personal and client exposure to New Zealand through Telecom New Zealand (NZT). It is a slow growth high yielding stock that is a good proxy for a country that is at a different point in the economic cycle than the US and benefits from a different type of economic demand than the US. This provides very good potential diversification from US holdings.

I think Callow needs more than just jawboning for his call to be correct. Many consider New Zealand to be a commodity based economy and the kiwi correlates closely to the Aussie dollar, the Canadian dollar and the Norwegian kroner. I think that a decrease in demand for commodities hurting all four crosses would need to be part of the picture for the kiwi to sell off as hard as I think Callow called for.

Assume Callow is exactly right though, then what for NZT? Clearly it gets hit. With roughly a 3% weight in client accounts (NZT is my only NZ exposure) the impact would be minimal to the portfolio. A weak Kiwi does not automatically make it a sell. It will still be a good proxy for a different type of economy even if the Kiwi drops by 5%.