The New Zealand dollar is heading for a 1.4 percent weekly fall against the greenback after Reserve Bank governor Graeme Wheeler talked down the local currency and signalled conditions were ripe for intervention.
The kiwi fell to 85.73 US cents at 5pm in Wellington from 86.97 cents on Friday in New York last week. It traded at 85.76 cents at 8am and 85.82 cents yesterday. The trade-weighted index was at 79.93 from 79.91 yesterday, and is heading for a 1.1 percent weekly decline from 80.84.
Wheeler yesterday called the kiwi dollar's strength "unjustified" and said the currency could have "a significant fall," while signalling a pause in his tightening cycle after lifting the official cash rate to 3.5 percent. The Reserve Bank's intervention policy includes a requirement that the currency must be at an "unjustified" level, based on a range of economic fundamentals, and must be at an exceptionally high or low point in the cycle. The central bank last used the word "unjustified" in an OCR statement in June 2007, after which it sold the kiwi.
"He's basically taken the playbook from the Reserve Bank of Australia governor, who always had an impact on the Aussie," said Michael Johnson, senior dealer at HiFX in Auckland. "There's renewed vigour to sell the kiwi, and it's still at pretty high levels."
HiFX's Johnson said the kiwi dollar is unlikely to have a dramatic fall, with New Zealand's high interest rates relative to the rest of the world continuing to attract investors.
New Zealand business confidence continue to dribble from a 20-year high in July, while remaining relatively upbeat, according to the ANZ Bank business outlook. The survey showed a net 39.7 percent of respondents in the survey expect business conditions to improve in the coming year, down from a net 42.8 percent in June.
The local currency advanced to 91.05 Australian cents at 5pm in Wellington from 90.82 cents yesterday, and gained to 87.23 yen from 87.08 yen. It decreased to 63.65 euro cents from 63.77 cents yesterday and was little changed at to 50.44 British pence from 50.40 pence.
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- Sunday Businiess with Andrew Patterson featuring Dr Clyde Smith
- Forsyth Barr’s Kevin Stirrat talks through the market reaction to the new government
- Iron Duke director Phil O'Reilly on how concerned businesses should be about the new Labour-led government
- New Sky TV NZ director Mike Darcey on the skills he brings from Sky UK, and what it's like working for Rupert Murdoch
- NBR Radio: The best interviews, with Grant Walker — updated daily