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

 


NZ dollar's drop stokes talk of intervention

NZ dollar's sharp decline raises speculation of Reserve Bank intervention

By Tina Morrison

Aug. 25 (BusinessDesk) - The New Zealand dollar dropped sharply in mid morning trade on Monday, shedding half a US cent in about five minutes and prompting speculation of Reserve Bank intervention.

The kiwi fell, from 9:15am when it was trading at 83.96 US cents, to 83.40 US cents at 9:21am. The local currency subsequently touched a six-month low of 83.36 US cents and was recently trading at 83.44 cents.

New Zealand's Reserve Bank has previously said the local currency is too high and raised the possibility it could intervene in the market by selling kiwi in an attempt to push it down.

Traders speculated today's sharp drop could have been caused by the central bank taking advantage of thin liquidity on a Monday morning, following a meeting of central bankers at Jackson Hole in the US at the weekend which strengthened the US dollar. However, the currency's move could also be attributed to a large options or hedging transaction by a trading bank.

"It dropped hard and fast," said Michael Johnston, a senior trader at HiFX. "It certainly had the hallmarks of something the Reserve Bank could do, it ticks a few of their boxes to justify intervention. They want to intervene when they have maximum market impact. I think Monday morning when no one else is in and liquidity is pretty thin, particularly after a Jackson Hole where they are less dovish on the US economy, so that's at the margin good for the US dollar as well so it's pulling the kiwi in the direction that they want it to go to."

However HiFX's Johnston said the rumours circulating in the market about intervention were unconfirmed and the drop could also be the result of a large currency flow as a result of an options structure being hedged by a trading bank.

"It's certainly not gospel," he said. "If not, then somebody is doing them a favour. If you wanted to move the kiwi, Monday morning is certainly a pretty good time. It's quite an opportune time to have maximum bang for your buck."

The Reserve Bank doesn't comment outside of its monthly disclosure on foreign currency assets and liabilities, spokesman Angus Barclay said. On Thursday, the bank is scheduled to publish its data for July.

(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