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

 

Research: ‘Ageing Well’ Science Challenge Launched

Science and Innovation Minister Steven Joyce today launched the Ageing Well National Science Challenge, confirming initial funding of $14.6 million. More>>

ALSO:

Scoop Business: Govt Resisting Pressure To Pump More Cash Into Solid Energy

Prime Minister John Key says it is “not the government’s preferred option” to make a fresh capital injection into the troubled state-owned coal miner, Solid Energy, but dodged journalists’ questions at his weekly press conference on whether that might prove necessary... More>>

ALSO:

Lagest Ever Privacy Breach Award: NZCU Baywide Accepts “Severe” Censure In Cake Case

NZCU Baywide says that once it was found to have committed a breach of a former staff member’s privacy, it had attempted to resolve the matter... the censure and remedies for its actions taken almost three years ago are “severe” but accepted, and will hopefully draw a line under the matter. More>>

ALSO:

Scoop Business: PayPal Stops Processing Mega Payments; NZX Listing Still On

PayPal has ceased processing payments for Mega, the file storage and encryption firm looking to join the New Zealand stock market via a reverse listing of TRS Investments, amid claims it is not a legitimate cloud storage service. More>>

ALSO:

Housing Policy: Auckland Densification As Popular As Ebola, English Says

Finance Minister Bill English said calls by the Reserve Bank Governor for more densification in Auckland’s housing were “about as popular in parts of Auckland as Ebola” would be. More>>

ALSO:

Crown Accounts: NZ Government Deficit Smaller Than Expected In First Half

The New Zealand government's operating deficit was smaller than expected in the first six months of the financial year, as the consumption and corporate tax take rose ahead of forecast in December, having lagged estimates in previous months. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

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