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

 


Kiwi strength poses problems for RBNZ

Kiwi strength poses problems for RBNZ.

By Garry Dean (Sales Trader, CMC Markets New Zealand)

RBNZ Governor Graeme Wheeler is experiencing the same frustration felt by his predecessors, as he tries to address non-tradeable inflationary pressures in the economy via increases to the OCR. Governor Wheeler suggested in March that 200 pts of OCR tightening could be seen over two years, but in a world where many developed economies are maintaining rates close to zero, the lure of higher NZ rates is tempting foreign investors in search of yield. This has contributed to a significant appreciation in the TWI, which currently sits 2.3% above the level the RBNZ forecast in March. Effectively we are seeing a significant tightening of monetary conditions via the exchange rate, and this affects the tradeables sector of the economy, limiting the ability of the RBNZ to address housing market concerns via interest rate increases. To the credit of the RBNZ, they have looked beyond simply increasing the OCR, and have acted to introduce LVR restrictions which have slowed activity in the lower end of the market. The government have made the central bank’s task even tougher by failing to address the issue of foreign housing investment, one of factors that have driven Auckland property prices higher.

While domestic economic releases this week are largely second tier, the markets will watch Wednesday’s April migration data with interest, given March saw net immigration hit an 11 year peak. Treasury forecasts have been revised upwards, and show an increase in forecast net immigration to 38,000 in the September quarter – another hurdle in the path of the Reserve Bank as it attempts to control housing inflation. Tuesday night sees the result of the fortnightly GlobalDairyTrade auction, and with prices having fallen 21% in the past three months this result will be watched closely.

The RBNZ are clearly unhappy with the strength of the Kiwi dollar, prompting the recent threat of intervention from Graeme Wheeler, and suggesting an OCR increase on the 12 June is far from certain. There is some relief in the fact that the USD has shown signs of strength recently, as economic data generally points to an economy growing in momentum after the weather affected start to the year. The USD Index has risen to 80.0 recently, although a major contributing factor has been the recent weakness of the Euro as markets prepare for additional QE at the 5 June ECB meeting. A stronger USD will keep the Kiwi under pressure, with a test of short-term support at 0.8605 favoured. A break of this level sees a potential retest of major longer-term support at 0.8515.

Ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news