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

 

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Auckland Outage: Power Mostly Restored Overnight

Vector wishes to advise that all but 324 customers have been restored overnight. These customers are spread throughout the network in small pockets. The main St Johns feeder was restored around midnight allowing most of the customers in all affected areas to have power this morning. More>>

ALSO:

Half Empty: Dairy Prices Drop To Lowest Since August 2009

Dairy product prices fell to the lowest level in more than five years in the latest GlobalDairyTrade auction, led by declines in butter milk powder and whole milk powder. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news