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."


© Scoop Media

Business Headlines | Sci-Tech Headlines


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Sweet Health: Sugary Drinks Banned From Hospitals And Health Boards

All hospitals and DHBs are expected to kick sugary drinks out of their premises. University of Auckland researcher, Dr Gerhard Sundborn who also heads public health advocacy group “FIZZ”, says he welcomes the initiative. More>>


NASA: Evidence Of Liquid Water On Today's Mars

Using an imaging spectrometer on MRO, researchers detected signatures of hydrated minerals on slopes where mysterious streaks are seen on the Red Planet. These darkish streaks appear to ebb and flow over time. More>>


Bird Brains: Robins Can Just Be Generally Clever

Research from Victoria University of Wellington has revealed that birds may possess a ‘general intelligence’ similar to humans, with some individuals able to excel in multiple cognitive tests. More>>


Psa-V: Positive Result On Whangarei Kiwifruit Orchard

Kiwifruit Vine Health (KVH) has received a Psa-V positive test result on Hort16A and male vines on a kiwifruit orchard in Whangarei. This is the first confirmed case of Psa-V on an orchard in the Whangarei region. More>>

Regional Accents: Are Microbes The Key To Geographical Differences In Wine?

A new study of six of New Zealand’s major wine-growing regions has found that differences in flavour and aroma of wine from different areas may depend more on microbes than was previously thought. More>>


Science: AgResearch To Cut Science Staff In Areas Of 'Reduced Demand'

“We are therefore consulting with our staff from today on a proposal to reduce science staff in areas of shrinking demand. Combined with recruitment planned in areas of growing demand, this would mean a net reduction of 15 scientists and 41 technicians at AgResearch in the 2015/16 year." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news