July 29 — The New Zealand dollar, the best performer of 16 major currencies against the dollar in the past year, is over-valued and will eventually decline, Agriculture Minister Jim Anderton said today.

“There is no question it is overvalued,” Anderton said in e-mailed notes for a speech in Christchurch. “A lot of the hot money coming in here thinking it won’t decline, will eventually get burned because the dollar will, sooner or later, return to more normal levels.”

The currency fell 4 percent last week after central bank Governor Alan Bollard signaled he may have finished raising interest rates. Bollard has raised the official cash rate four times this year to a record 8.25 percent, helping the local dollar gain 24 percent in the past year.

“Our high interest rates are keeping the dollar high,” Anderton said. “I personally have always believed we emphasize inflation at the expense of the productive sector too much.”

Bollard is required by the government to use interest rates to keep inflation between 1 percent and 3 percent. Farmers say he focuses too much on inflation in the housing market and ignores the effect of the high currency on exports.