The Australasian session was a rocky one for the New Zealand Dollar, with the currency plunging to a five-week low against its US rival and posting considerable declines against the majority of its other most traded currency peers.
The New Zealand Dollar exchange rate was trading in the region of 0.8402 against the US Dollar as of 09:45 am GMT
The catalyst for the ‘Kiwi’s losses were remarks made by the Reserve Bank of New Zealand’s Governor to the nation’s finance and expenditure select committee.
Since the onset of the global financial crisis the New Zealand Dollar has leapt by 45 per cent against the US Dollar.
For months concerns that the current strength of the ‘Kiwi’ could prove damaging to the nation in the long term by hurting South Pacific exporters have been increasing, but now the Reserve Bank is actively taking preventative steps.
According to Wheeler the central bank sold off the ‘Kiwi’ and is willing to do so again if it proves necessary to boosting New Zealand’s economic growth.
Wheeler asserted: [The RBNZ is] ‘on the record that it is prepared to intervene in the exchange rate. We’ve also indicated that we would not expect, given the strength of the flows, that intervention would materially change the level of the exchange, but we could take potentially the tops off rallies. In terms of activity, there has been some intervention […] we didn’t want to be more specific on it, but we acknowledge there has been some.’
Wheeler also implied that should the action already taken prove insufficient at lowering the New Zealand Dollar’s exchange rate, interest rate cuts could be considered.
In a Financial Stability Report published alongside Wheeler’s statement the RBNZ commented: ‘The relative strength of the New Zealand economy, in a period where the global outlook is quite uncertain, has pushed the New Zealand Dollar to new highs that will be problematic for some firms that compete in international markets.’
Tighter lending rules were also announced, and the RBNZ hopes that ‘This will strengthen the capacity of the banking system to weather a housing downturn and should also lead the banks to review the riskiness of the loans they are currently writing.’
In response to the development one currency strategist noted: ‘Governor Wheeler has been concerned for a while about the strong Kiwi Dollar so this is part of his jawboning to drive the currency lower. It’s a bit of a surprise that he said he can intervene to drive the currency lower. That’s been a shock for the Kiwi.’
Immediately following Wheeler’s announcement the New Zealand Dollar shed 1.1 per cent against its US rival.
Current New Zealand Dollar (NZD) Exchange Rates
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The New Zealand Dollar/US Dollar Exchange Rate is currently in the region of: 0.8402 <
The New Zealand Dollar /Euro Exchange Rate is currently in the region of: 0.6416 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5426 <
The New Zealand Dollar /Australian Dollar Exchange Rate is currently in the region of: 0.8247 <
The US Dollar/ New Zealand Dollar Exchange Rate is currently in the region of: 1.1919 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.8447 >
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.5613 >
The Australian Dollar/New Zealand Dollar Exchange Rate is currently in the region of: 1.2122 <
The Canadian Dollar/New Zealand Dollar Exchange Rate is currently in the region of: 1.1779 >
(Correct as of 09:45 GMT)
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