Financial markets have interested recent economic data too optimistically, says Reserve Bank governor Alan Bollard.The comment came in response to a series of questions about the New Zealand dollar's surge against the US dollar.There is little the Reserve
Financial markets have interested recent economic data too optimistically, says Reserve Bank governor Alan Bollard.
The comment came in response to a series of questions about the New Zealand dollar’s surge against the US dollar.
There is little the Reserve Bank can do about the surge, Dr Bollard said, but he added that one reason is recent unemployment data, in particular, had seen a surge of optimism about the prospects for the New Zealand economy among the financial markets.
“There’s been some misinterpretation of New Zealand data…. some of them have interpreted that data rather more optimistically than we would.”
The recent data – which saw unemployment drop from 6.9% to 6.3% of the workforce – was not a surprise but was broadly in line with the expectations of a slow recovery, he said.
The Reserve Bank is unlikely to intervene in the currency markets to try to bring the New Zealand dollar down, he said.
One reason is the drivers of the surge is what is happening in larger economies, “and you will be aware of the Swahili proverb that when elephants fight or make love the grass gets crushed.”
The other thing holding up the New Zealand currency is high commodity prices, he said.
