Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


RBNZ backs up kiwi dollar jawboning with $199 mln sell down

RBNZ backs up kiwi dollar jawboning with $199 mln sell down

Jan. 31 (BusinessDesk) - The Reserve Bank is putting its money where its mouth, selling down its holdings of New Zealand dollars last month as governor Graeme Wheeler continues to call the currency overvalued.

The bank sold a net $199 million in December when the trade-weighted index was an average 73.92, adding to the $64 million sold in November, according to Reserve Bank figures published yesterday. That's the biggest monthly sale since mid-2008 when the kiwi dollar plunged going into the global financial crisis.

Wheeler today said the kiwi dollar, which recently traded at 83.59 US cents and 75.17 on a trade-weighted basis, is overvalued and is the main reason inflation is tracking below the bank's target band.

Mike Jones, currency strategist at Bank of New Zealand in Wellington, said the central bank is backing up its heightened rhetoric with some action, and is signalling a TWI at 75 is too high.

"The bank is walking the talk by selling the kiwi dollar a little more aggressively," Jones said.

Since taking the Reserve Bank reins in September last year, Wheeler has criticised the strength of the kiwi dollar, calling it overvalued and saying it's holding back the economic recovery. He has previously ruled out intervening in currency markets, which he says wouldn't have a sustainable influence on the kiwi.

The central bank last intervened in currency markets in 2007 when it sold more than $2 billion to ease the last peak in the kiwi dollar.

The bank manages foreign exchange reserves to allow for efficient intervention and crisis management, and had an intervention capacity of $9.14 billion, as at Dec. 31.

The last major monthly movement in the Reserve Bank's foreign reserves was $525 million of net purchases in March 2011 in the wake of the Canterbury earthquake when then-governor Alan Bollard made an emergency cut to the official cash rate. The TWI was an average 67.72 that month, 11 percent weaker than the average sale last month.

Jones said the central bank has been running more of its foreign exchange programme unhedged, which is more expensive than running a hedged programme.

"The bank made a whopping big profit in the GFC, but since then, it's been haemorrhaging cash to fund its net short positions," he said. "They're hoping they can smooth the peaks and troughs, and can make some money to offset currency costs."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Convention Centre: Major New SkyCity Hotel And Laneway For Auckland

Today SKYCITY Entertainment Group Limited revealed plans to build a new hotel and pedestrian laneway of bars, restaurants and boutique shopping on land it owns in the Nelson and Hobson Streets block, expanding the SKYCITY Entertainment Precinct. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news