High exchange rate a concern, Key says
The NZ dollar is in uncharted territory against the US dollar, and the PM is worried.
The New Zealand dollar is in uncharted territory against the US dollar and the unprecedented exchange rate is a concern, Prime Minister John Key says.
The dollar broke through to a new post-float highyesterday in the wake of much better than expected trade data.
It traded at US82.16c late morning, the highest level since it was set free in March 1985. The previous post-float high was US82.15c.
"The reason, in my view, that the New Zealand dollar is trading at such high levels against the US is because of the inherent weakness in the US," Mr Key said at his post-cabinet press conference late yesterday.
"It's because of the size of the deficit in the United States of America and the enormous amount of debt that economy is producing, and the fact that that debt is being funded through quantitative easing -- in the short term, that is proving to be very challenging."
Asked how high he thought the dollar could go, Mr Key replied: "I don't know...we're in uncharted territory so that's of some concern."
Mr Key said it was a good news, bad news story for many exporters.
"There's an imported component of what they export so that price reduces," he said.
"For New Zealand consumers it takes the pressure off oil prices and imported goods, and for commodity-based exporters life is a bit more bearable because of high commodity prices.
"But we all acknowledge that for the manufacturers in a non-commodity linked area, selling into a US dollar-based market, these are levels that are not sustainable."
Mr Key said the Reserve Bank had the independence to intervene but he had not had any discussions with it.
"It wouldn't be appropriate for me to give them guidance."
NZPA and NBR staff
Tue, 31 May 2011
Tue, 31 May 2011
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High exchange rate a concern, Key says
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