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

 


NZ dollar falls after RBNZ says kiwi strength 'unjustified'

NZ dollar falls after RBNZ says kiwi's strength 'unjustified', stoking intervention talk

By Tina Morrison

July 24 (BusinessDesk) - The New Zealand dollar shed almost one cent against the US dollar to a six-week low after Reserve Bank governor Graeme Wheeler said the currency's strength was "unjustified", invoking one of the central bank's criteria to intervene in the foreign exchange market.

The kiwi fell as low as 86.05 US cents, from 87.02 cents immediately before the central bank's 9am statement. It was recently trading at 86.21 US cents. The trade-weighted index, fell to 80.29 from 80.97 immediately before the statement.

Governor Wheeler today raised the official cash rate as expected for a fourth consecutive meeting to 3.5 percent in an attempt to slow inflation in an expanding economy driven by the rebuilding of earthquake damaged Christchurch, a strong housing market, elevated commodity prices and increased migration. Wheeler said today the speed and extent of further OCR increases will depending on the assessment of the rate rises and the implications of future economic and financial data for inflationary pressures.

Wheeler's comments were "slightly more dovish" than expected, said Westpac Banking Corp. senior market strategist Imre Speizer. The signal for a pause in interest rate hikes "was probably worth a little bit of fall in the kiwi," Speizer said. "The rest of the fall in the kiwi was driven by the strong language around the high currency. It was stronger language than we expected and it could be interpreted by some as a veiled intervention threat."

The Reserve Bank's intervention policy includes a requirement that the currency must be "unjustified" based on a range of economic fundamentals, and must be at an exceptionally high or exceptionally low point in the cycle.

The New Zealand dollar will probably continue its slide today below 86 US cents and may head towards 85.50 cents in the days ahead, Speizer said.

In his one-page statement today, Wheeler noted the decline in export prices for dairy products and timber, saying that "would reduce primary sector incomes over the coming year".

"With the exchange rate yet to adjust to weakening commodity prices, the level of the New Zealand dollar is unjustified and unsustainable and there is potential for a significant fall," Wheeler said.

Later this morning, Statistics New Zealand publishes the country's trade balance for June which is expected to show weaker export receipts.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Oceans: NZ Jumps Into International Shark Agreement

New Zealand has boosted the protection of sharks by signing the Memorandum of Understanding on the Conservation of Migratory Sharks. More>>

ALSO:

Insurance: EQC To Double Payout, Scrap Contents Insurance

New Zealand’s Earthquake Commission may double its payout amount, scrap contents insurance and process claims through private insurers under the government’s long-running review of funding and management of the state-run earthquake insurer. More>>

ALSO:

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:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news