POLL: NBR readers on whether the dollar is overvalued
Most NBR ONLINE readers believe the dollar is overvalued, but disagree about what should be done about it.
In a poll conducted last week, readers were asked: Is the New Zealand dollar overvalued?
The response:
- Yes, and the Reserve Bank should intervene (8%).
- Yes, but intervention won't work (65%).
- No (27%).
Former Reserve Bank governor Don Brash has recently said the dollar is overvalued and is hurting exporters, but says efforts to bring it down could reduce the real wages for New Zealand workers.
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Comments and questions10
A chronic current account deficit, ballooning overseas debts and Crown budget deficits funded by same overseas borrowings - and we have people believing the NZ$ is not overvalued!
Keep borrowing, folks until the Greece situation visit you.
If we have a current account deficit it is better to have an overvalued $dollar than an undervalued
Ever heard of qualitative easing?
I'm sceptical the current account statistics are accurate. They are the small difference in two large numbers estimated differently. I suspect the movements are significant but the absolute magnitude, not.
What most people overlook is that the FX rate is comparative i.e. how our currency ranks against the rest. The NZD rate is high not because we are fiscally outstanding but because the US, Europe and Japan are so appalling in their economic management in the past and currently. What investor would want to risk investment in those currencies when most of them are trying to fix the GFC issues by printing more cash which has a good chance of destroying the value of holding investments in their currencies via inflation? There are only a handfull of countries in the developed world without actual or potential bank failures, including NZ and Aus and so our currencies are being revauled upwards in comparison to the losers.
The NZ$ was floated on 4 March 1985 at the initial rate of US$0.4444. When the NZ$ was trading US$0.50 on 6 March 2009, most Financial Experts predicted NZ economy would be doomed...who is actually telling the TRUTH!
If we revalue the dollar downwards it means we are selling our products at a further discount.
Whats wrong with NZ producers can't they sell at the value proposition. can we only grovel with extra discounting to sell our goods.
How do you think Australia is faring with their dollar worth 1.03 US Dollars.
Rather badly in the non mining sectors actually.
And now with the miner prices dropping, A$ is adjusting accordingly.
Meanwhile in NZ, the idea is to keep borrowing and hope.
We believe the dollar is probably fairly valued.
Easy to say,but tough to do,exporters need to adjust to the new reality.
liberte