NZ dollar drops after IMF says it is overvalued

The New Zealand dollar dropped after the International Monetary Fund (IMF) said it was over valued by between 10 and 25 percent.

NZPA
Thu, 01 Apr 2010

The New Zealand dollar dropped after the International Monetary Fund (IMF) said it was over valued by between 10 and 25 percent.

The NZ dollar dropped from around US71.13c to US70.62c after the report was released but recovered to be around US70.83c by 1pm. It was at US70.96c at 8am, similar to its level at 5pm yesterday.

The IMF supported the free floating exchange regime as appropriate for this country.

Part of the overvaluation of the NZ dollar may be temporary and the exchange rate may depreciate as the interest rate differential narrowed with eventual tightening by the United States Federal Reserve, the report said.

The report also repeated several points made by IMF Asia and Pacific division chief Ray Brooks this week at the end of the assessment, that key vulnerabilities continued to be levels of household debt and external debt.

Finance Minister Bill English said the IMF report backed the Government's approach to economic management.

"Kiwi moved down about 50 points and made about 30 points back," one dealer said.

The move was notable in an otherwise quiet day ahead of US non-farm payrolls data on Friday US time.

"That should be interesting as most of the rest of the world is closed," he said.

The US dollar rose to a three-month high against the yen on speculation that Japanese institutions may sell the yen to buy higher yielding assets in the new fiscal year.

The NZ dollar was little changed at 66.21 yen by early afternoon from 66.32 yen yesterday. It was 0.5238 euro from 0.5291 euro at 5pm yesterday. It was at A77.18c from A77.55c yesterday.

The trade weighted index was 65.84 by early afternoon from 66.19 at 5pm yesterday.

NZPA
Thu, 01 Apr 2010

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NZ dollar drops after IMF says it is overvalued