The New Zealand Dollar (NZD) fell sharply against the Pound (GBP), US Dollar (USD) and other major peers on Monday and is on track to make its largest three-day decline since 2011.
Against the US Dollar the ‘Kiwi’ declined to a one-year low and a two-year low against the Pound after the Reserve Bank of New Zealand said that it had directly intervened in the currency market to weaken the currency, which it deems as ‘overvalued’.
Prime Minister John Key also signalled that he wanted the currency to be weaker.
‘A New Zealand Dollar worth $0.65 against the US Dollar would represent a ‘Goldilocks’ rate; not too high, not too low, just about right. However, just because I might think that’s about the rate that works for exporters doesn’t mean that’s the rate it’s going to get to,’ said Prime Minister Key in an interview with reporters.
The RBNZ released a report, which showed that it had sold $NZD 521 million last month after the banks governor Graeme Wheeler said that the currency was too strong. The revelation dragged sharply on the ‘Kiwi’.
The move by the RBNZ is thought to have been because of falling commodity and dairy prices and the negative impact the currency is having upon the nation’s exporters.
New Zealand has been enjoying a period of strength in its economy as it has profited from high demand for New Zealand meat and dairy products from Asia.
As a result, the nation has seen the pace of its economic growth hit a 10-year high. The strength of the economy has also seen the RBNZ hike interest rates four times over the course of the year.
Despite that, the New Zealand economy is coming under pressure from sharp declines in dairy prices, the nation’s most exported commodity and last week the New Zealand currency came under pressure last Thursday after Reserve Bank of New Zealand Governor Graeme Wheeler signalled that he is prepared to sell the nation’s currency to weaken it.
New Dollar Exchange Rate Forecast
The ‘Kiwi’ is forecast to make further declines against the US Dollar and other major peers throughout the rest of the session as the day’s US economic data releases are likely to increase demand for the ‘Greenback’ and put further pressure upon the currency.
Against the Pound, the ‘Kiwi’ could regain some ground if the latest UK GfK Consumer Confidence data comes in below expectations.
UPDATE
The New Zealand Dollar’s weakness persisted overnight and the South Pacific currency extended losses following the release of less-than-spectacular economic reports for New Zealand.
As forecast, the number of building permits issued in New Zealand stagnated in August on a month-on-month basis. This data was followed by New Zealand’s NBNZ Business Confidence index. The sentiment index slipped from 24.4 to 13.4 in September.
New Zealand’s gauge of Activity Outlook rose from 36.6 to 37.0.
Although the New Zealand Dollar continues to trade in a softer position against the US Dollar and Pound, the currency did manage to pare some of its losses as speculation that the ‘Greenback’s rally has been overdone saw the USD soften.
New Zealand Dollar (NZD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
New Zealand Dollar,
,US Dollar,0.7748 ,
New Zealand Dollar,, Pound Sterling,0.4772 ,
New Zealand Dollar,,Euro,0.6121 ,
New Zealand Dollar,,Australian Dollar,0.8901 ,
Euro,, New Zealand Dollar ,1.6342 ,
US Dollar,, New Zealand Dollar ,1.2915 ,
Australian Dollar,, New Zealand Dollar ,1.1242 ,
Pound Sterling,, New Zealand Dollar ,2.0933 ,
[/table]
