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

 

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