Dollar leaps above US83c as Bernanke announces opened-ended QE3
The US is going to print the equivalent of $NZ102 billion a month from now until ... whenever.
The New Zealand dollar leapt upwards more than a cent against the US dollar this morning, going from US82.02cents to US83.23 in the hour after US Federal Reserve chairman Ben Bernanke’s announcement.
Dr Bernanke announced an “open-ended” round of quantitative easing, saying the Federal Reserve will increase its balance sheet by about $US85 billon each month by the end of the year.
The new programme of bond buying will continue until the US economy improves and, in particular, the labour market picks up, Dr Bernanke said at his press conference this morning.
The programme, dubbed QE3, follows two previous rounds of bond buying. The first, initiated in the depths of the financial crisis in late 2008, was worth $US1.25 trillion (roughly $NZ1.47 trillion at the time).
The second round, which began in November 2010, was valued at roughly $NZ731 billion then.
To put these numbers in context, New Zealand’s annual GDP, in current prices, was just under $NZ200 billion.
The programme was signalled in advance but the open-ended aspect was not.
The effort was also expected to push the US dollar downwards against other currencies, including that of New Zealand, and in that sense it has been immediately successful.
The kiwi rose as high as 83.13 US cents, trading at 83 US cents at 8am up from 82.19 cents yesterday at 5pm. The trade weighted index increased to 73.35 from 72.86.
"The New Zealand dollar has done an awful lot already this morning – it may slow to build on these recent gains," saysd Alex Sinton, senior dealer at ANZ New Zealand. "You would expect some more US weakness but it may not come on the day."
Topside resistance for the kiwi is likely to come in around 82.30 US cents, he says.
New Zealand's Reserve Bank left its official cash rate unchanged at 2.5% yesterday, while delaying its forecast increase in the 90-day bank bill rate, seen as a proxy for the benchmark interest rate, until 2014.
The review was governor Alan Bollard's last before former World Bank executive Graeme Wheeler takes over on September 25.
New Zealand's food price index for August will be released by Statistics New Zealand this morning, followed by the ANZ-Roy Morgan Consumer Confidence survey at 1pm.
The kiwi rose to 78.65 Australian cents from 78.39 cents and increased to 51.37 British pence from 50.97 pence. The kiwi climbed to 63.89 euro cents from 63.55 cents and advanced to 64.33 yen from 63.85 yen.
Additional reporting: BusinessDesk
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Comments and questions18
Printing infinite money that is loaned at interest to the US government by a private bank seems like a stupid solution to a debt crisis
But ultimately the value of the $US will , as a result of money printing, descend to the level where the US runs a balance of payments surplus , and repays its debt to the rest of the world in worthless US dollars. Brilliant!
Meanwhile, the rest of the world can whistle Dixie as it slowly gets screwed.
Fortress America realised. Neat!
Right on Farmer Brown - our only solution is to join the team and go with them
if we dont we bleed our exporters to death, this is another wound to income earners, how much blood is left?
Taxation is theft by stealing your money; printing money is theft by stealing the purchasing power of your money. There is currently a pogram against savers and the middle class, and the Keynesians are winning it: savers and the middle class are being destroyed.
Over last two nights a German court has cleared the way for a huge European bailout fund to create opened ended debt in Europe, and Bernanke now announces a policy of open ended debt in the USA, all to solve a world crisis caused by too much debt.
For 2014, it would pay to remember Mr Cunliffe 'believes' insanity like this. And good on Mr Cameron - with lots of qualifications - for being the only western leader apparently trying to seriously roll this nonsense back.
The ability of banks to create money out of thin air should be abolished the world over. Let's start here.
I assume you mean the ability of Govts to create money out of thin air?
I chose a good morning to buy my new Chucks from the US then! #winning
On the figures I can find, that is a devaluation of about 1% of the US m2 per month, or about 12% p.a if it goes on that long. So the $NZ should be at parity about this time next year. Maybe I will buy a Cadillac...
$NZ parity with the $US seems assured.
So we can't sell them dairy commodities with the present dairy industry model : that's definite.
So when do we re-design the dairy industry to match reality.
We've had one trigger; when Britain joined the EEC. We did nothing.
Well, we did re-arrange the deck chairs by forming Fonterra.
But that has been a total failure in adding the sort of value to our dairy production that we need if we are going to pay our way.
So $NZ60 billion in export receipts by 2025 is it chaps? Tell us more. We are all ears.
Don't say that Fonterra is going to co-operate with, and assist the emerging added-value dairy industry : that is simply not credible given Fonterra's defensive mind-set , and the DIRA which permits Fonterra to fudge the true value of raw milk.
Stifling competition is the name of the game that Fonterra is in : we can't have any upstarts showing up the dismal performance of our largest industry, can we now?
It's great to see some people finally waking up to this globalist sham. Question is, are we going to make enough noise about it? Most of the population is asleep and would look at you like you are crazy - they are too scared to do their own research to see what is really going on.
If NZ is fundamentally a country of importers for household goods, vehicles, oil, clothes, overseas travel and so on which are largely in US$ transactions at the importer level then a high NZ Dollars makes us all wealthier when it comes to such acquisitions. On the other side for those who export in US$ they may need to reduce NZ$ price or increase quality to maintain NZ$ price. If you are an exporter with NZ$ debt selling into US$ markets then you have a problem because less NZ$ come back to you on US$ conversion. . But if you are an exporter with modest debt and someone who spends most of your income on US$ imports be they the above items or even imported machinary, tractor, trucks for business etc then the high NZ$ immediately becomes a benefit even though one has earnt less of them. So the question I have is has the mix changed. Ie low NZ$ means more of them when selling into US$ markets but less bang for the buck so to speak when using those same dollars buying from US$ markets. Low dollar only seems to make sense if one is exporter with large NZ$ debt unless export sector industry has no exposure to import market such as fuel, machinary, clothing, vehicles. How much relative to incomes were Tractors, trucks, bulldozers, fishing boats, 747's, BMW's in 2002? Quite a lot one would have thought due to low NZ$..
This is not a strong $NZ story : against a currency like the Swiss Franc the $NZ is exactly where it was ten years ago.
This is a story about the weakness of the $US, because the Fed is printing trillions of new dollars and will continue to do so.
respectfully disagree. pound is weak against nz, euro is weak against nz and so on. swiss is strong for various reasons that they should not be proud of
What was in the water at Bolt Hole in Wyoming last week?
If it was prune juice , then watch out when Helicopter Ben gets up there and turns it on.
The perennial problem remains of a high nz dollar AND high property prices (due to low interest rates) increasing spending power. This equals an impending property bubble and huge trade deficits. I hate to say it but a capital gains tax is the only way to reduce spending on housing and instead channel these funds towards using our high dollar to pick up bargains overseas! we should secure our future now while we still can
Our so called low interest rates are not that low - others have much lower. These are not the reason for high property prices - cost of consturction is rediculous in NZ, availability of land is artificially tight, new houses are too big (basically unafordable), developers want sale of plans - long build time, We have a housing shortgage now in the tens of thousands - and thats before ChCh. There is a bubble to burst, but it might not be the one you expect.
Hey lets declare war on the US now and get Currency Union with them that way.Or what about something sensible like pegging our currency to the value of the US $.