Andy Krieger

Andy Krieger is a currency trader best remembered for executing a single trade so large that his short position in the New Zealand dollar briefly exceeded the entire circulating money supply of the country. In January 1987, trading for Bankers Trust, Krieger shorted the kiwi relentlessly and profitably, turning a misjudgement by the New Zealand central bank into one of the most concentrated and outrageous bets in foreign exchange history.

The setup: A currency out of equilibrium

In the mid-1980s, the New Zealand dollar was trading at inflated levels due to the central bank’s high interest rates. The Reserve Bank of New Zealand had hiked rates aggressively to combat inflation, a policy that attracted international capital inflows and pushed the currency up. But Krieger, analysing the fundamentals, saw an obvious trade: the currency was overvalued, the interest rate premium was unjustifiable given economic conditions, and the moment the central bank signalled a shift, the kiwi would collapse.

Krieger was a young, aggressive trader at Bankers Trust with a keen eye for currency volatility and the confidence to bet big. He had already made a reputation as someone willing to take outsized positions and hold them. Bankers Trust, at the time, was one of the world’s leading currency traders, with access to deep funding and limited risk oversight. It was the ideal environment for a trader with conviction and nerve.

The execution: Short everything

Starting in late 1986, Krieger began systematically shorting the New Zealand dollar. By January 1987, his position had grown to legendary proportions. Conservative estimates put the notional size at around 4 billion New Zealand dollars—roughly equivalent to the entire circulating money supply at the time. No single trader should have been able to accumulate a position of that magnitude without moving the market into red alert, but a combination of factors enabled Krieger to get there: the foreign exchange market was less transparent than equities, position limits were not rigorously enforced, and counterparties were happy to sell him what he wanted because they were making fees.

The position was so large that it became known inside Bankers Trust and the market more widely. The New Zealand authorities learned of it and realised they were facing a genuine threat to currency stability. Krieger was betting not just that the kiwi would fall, but that he would profit from the panic it would cause as other traders liquidated their long positions to escape his massive short.

The collapse and the profit

When the Reserve Bank of New Zealand finally signalled that interest rates would be cut, the currency began to slide. Krieger’s thesis was correct. But as the kiwi weakened, the bank and other authorities grew alarmed. They would eventually have to acknowledge that a single trader at a major bank had effectively weaponised the foreign exchange market and put a small country’s currency under siege.

The trade worked. Krieger is said to have made somewhere in the neighbourhood of USD 300 million on the position, though the exact figure was never publicly confirmed. Bankers Trust earned significant trading revenues. The New Zealand dollar fell sharply, and Krieger’s short position was a direct cause.

The aftermath and lessons

The trade created a firestorm. Regulators, central banks, and the financial community debated what had happened and how to prevent it. The New Zealand authorities felt violated—a private trader had been allowed to take a position in their currency that dwarfed the central bank’s own ability to defend it. Bankers Trust faced criticism for permitting such concentrated risk and for not having controls over a single trader’s exposure.

The incident exposed fundamental gaps in risk management at major banks. Krieger had not violated any explicit rule, but he had operated at the edge of what was permissible, and the sheer size of his position had created systemic risk. The New Zealand dollar trade became a cautionary tale: position limits, even informal ones, exist because one brilliant trader with perfect conviction and deep funding can destabilise a currency.

Krieger himself moved on. He eventually left Bankers Trust and continues to work in foreign exchange and macro trading. But his name remains attached to one of the most audacious and least defensible bets in financial history. The trade was not illegal and the analysis was sound, but the execution—the sheer magnitude and concentration of the position—revealed that banks had not yet learned how to constrain the ambitions of brilliant traders with access to leverage.

The broader significance

The Krieger trade was one of several incidents in the 1980s that forced banks and regulators to confront the reality that individual traders could move major markets. It preceded the LTCM collapse of 1998 and other episodes where concentrated positions threatened financial stability. Each incident taught a harder lesson: trading edge can be real and durable, but leverage and size can turn a winning trade into a systemic risk.

For currency traders, Krieger became a folk hero—the trader who had the nerve and skill to bet correctly on an enormous scale and collect. For risk managers, he became a symbol of what happens when you don’t say no.

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