Kiwi dollar down 3c - here's why
The GDP result is only one of three factors in this morning's slide.
The New Zealand dollar dropped below US79c late morning having ended yesterday at US82.08c.
The drop began before today’s lower-than-expected June quarter GDP figure of 0.1%, although that GDP figure pushed the currency lower, and at midday was US79.87c
The GDP result is only one of three factors in this morning’s slide.
One is the comments by Reserve Bank governor Alan Bollard in New York where he stated there was “no rush” to raise the official cash rate. This was more dovish than Dr Bollard appeared last week and would could have given investors expecting a rate rise in December or January pause for thought.
The other factor was this morning (NZ time) announcement from Federal Reserve chairman Ben Bernanke of a major intervention in the markets, selling short term US Treasury securities of three years or less and buying long term securities with a six to 30-year maturity.
The announcement effectively rules out fears of a third round of quantitative easing and has been described as an “aggressive” version of ‘Operation Twist’, an intervention by the Federal Reserve back in the early 1960s.
Dr Bernanke's announcement has led to a flood of currency flows back into the US dollar and away from smaller currencies such as the Australian and New Zealand dollars.
Rob Hosking
Thu, 22 Sep 2011
Thu, 22 Sep 2011
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Kiwi dollar down 3c - here's why
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