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

 


NZ dollar drops after Wheeler says RBNZ may intervene

NZ dollar drops after Wheeler says RBNZ may intervene to sell currency

By Tina Morrison and Suze Metherell

May 7 (BusinessDesk) – The New Zealand dollar dropped half a cent after Reserve Bank governor Graeme Wheeler said the bank may sell the currency should it remain high while export prices weaken.

The kiwi fell as low as 86.95 US cents, from 87.41 cents immediately before the 9:30am release of the speech, and was recently trading at 87.15 cents. Overnight, the New Zealand dollar touched 87.79 US cents, the highest level since its post-float high in August 2011 of 88.40 cents. The trade weighted index touched a record 81.21 overnight and was recently trading at 80.68.

“If the currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars,” Wheeler said in speech notes for delivery to the DairyNZ Farmers’ Forum in Hamilton. “The Reserve Bank considers that the exchange rate is overvalued and does not believe its current level is sustainable.”

Investors favour the New Zealand dollar as a resurgent economy led to the country being the first in the developed world to raise interest rates this year, following the global financial crisis. The central bank has hiked the benchmark rate twice in the last two months and signalled more rises are planned.

However, Wheeler today signalled rate rises may not be as regular as previously assumed if the exchange rate remains strong.

That would weaken tradables inflation and be a factor in the bank’s view of the “extent and speed” of hikes in interest rates, Wheeler said.

“When the exchange rate rises there is less need to hike,” said Imre Speizer, senior market strategist at Westpac Banking Corp. in Auckland. "It seems like a long time ago that we heard anybody talking about the potential for intervention, so it's been raised, causing a fall in the kiwi, clearly, and I think there might be further fall out from this tonight. It perhaps implies they're a little bit closer to the possibility of intervention.”

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Gordon Campbell: On Tiwai Point (And Saying “No” In Greece)

Its hard to see how Rio Tinto’s one month delay in announcing its intentions about the Tiwai Point aluminium smelter is a good sign for (a) the jobs of the workers affected or (b) for the New Zealand taxpayer. More>>

ALSO:


Half Empty: Dairy Product Prices Extend Slide To Six-Year Low

Dairy product prices continued their slide, paced by whole milk power, in the latest GlobalDairyTrade auction, weakening to the lowest level in six years. More>>

ALSO:

Copper Broadband: Regulator Set To Keep Chorus Pricing Largely Unchanged

The Commerce Commission looks likely to settle on a price close to its original decision on what telecommunications network operator Chorus can charge its customers, though it probably won’t backdate any update. More>>

ALSO:

Lower Levy For Safer Cars: ACC Backtracks On Safety Assessments

Dog and Lemon: “The ACC has based the entire levy system on a set of badly flawed data from Monash University. This Monash data is riddled with errors and false assumptions; that’s the real reason for the multiple mistakes in setting ACC levies.” More>>

ALSO:

Fast Track: TPP Negotiations Set To Accelerate, Groser Says

Negotiations for the Trans-Pacific Partnership will accelerate in July, with New Zealand officials working to stitch up a deal by the month's end, according to Trade Minister Tim Groser. More>>

ALSO:

Floods: Initial Assessment Of Economic Impact

Authorities around the region have compiled an initial impact assessment for the Ministry of Civil Defence, putting the estimated cost of flood recovery at around $120 million... this early estimate includes social, built, and economic costs to business, but doesn’t include costs to the rural sector. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news