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

 


RBNZ’s Wheeler doesn’t expect ‘significant’ rise in kiwi

RBNZ’s Wheeler doesn’t expect ‘significant’ rise in kiwi, now at post-float high, as rates increase

By Paul McBeth

March 13 (BusinessDesk) - Reserve Bank governor Graeme Wheeler has told MPs in Wellington that he doesn’t expect a “significant” move in the New Zealand dollar as a result of the new interest rate hiking cycle.

The trade-weighted index, a measure of the New Zealand dollar against a basket of currencies, rose to a new post-float high 80.13 today, and recently traded at 80.07 after Wheeler lifted the official cash rate a quarter-point to 2.75 percent and said there could be another 2 percentage points of increases over the next two years. The kiwi climbed to a nine-and-a-half month high against the greenback, and was recently at 85.56 US cents.

The strength of the currency was largely due to New Zealand’s 40-year high terms of trade, which measures the quantity of imports the country can buy with a set amount of exports, Wheeler told Parliament’s finance and expenditure committee. With most advanced economies running near-zero interest rates and unlikely to start raising rates until next year, New Zealand’s rates will become more attractive, though Wheeler said and the market is largely prepared for that.

“The issue is how much of that is already embedded in forward rates, and we think a great deal of that is already embedded into the yield curve,” Wheeler said. “So we wouldn’t expect to see significant exchange rate effects from this tightening phase. We could be wrong of course, but we wouldn’t expect to.”

The central bank anticipates the currency will remain elevated over its projection through to March 2017, “depreciating only gradually,” according to today’s monetary policy statement. The bank sees the TWI averaging 78.4 in the current March quarter, falling to 78 next year and 76.6 in March 2015

Wheeler said the central bank has been concerned about the strength of the currency and its effect on exporters for some time, and that the level of the exchange rate isn’t sustainable in the long run.

Last year the Reserve Bank intervened in foreign exchange markets in an attempt to take the top off the kiwi’s rally, selling a net $256 million in April 2013. That was the first time the central bank confirmed such an intervention since mid-2007 when it sold a net $2.2billion over two months. The bank had an intervention capacity of almost $9.5 billion in January, according to central bank figures.

Assistant governor Grant Spencer told the committee the elevated terms of trade was the major driver for the strength in the currency, although New Zealand’s relative interest rate advantage was a relevant factor.

“We assume the terms of trade will come off over the forecast track to some extent and the exchange rate will come off in line with that,” Spencer said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news