The biggest drop ever

October 30th, 2008 at 10:08 am by David Farrar

It has recovered to 59c today, due to action in the US but that has to be the largest and steepest drop since the dollar floated.

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30 Responses to “The biggest drop ever”

  1. expat (4,050 comments) says:

    Pretty nasty all right.

    Anyone (sane) picking bottom yet?

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  2. Fairfacts Media (372 comments) says:

    When I visit the UK for Xmas to see my parents, it looks like I will be stopping over in Bangkok this year.
    Good thing I saw New York last December.

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  3. Banana Llama (1,043 comments) says:

    Wow thats certainly an impressive display from our Dollar, it must be those 9 years of economic and social growth that has seen us enter a golden age of enlightenment not experienced since a caveman realized rocks could be used to make fire as well as weapons.

    My biggest concern right now how do we get out of this, we have had 9 years of opportunity pissed into the wind and i can’t see how the farmers will benefit since every country is tightening their belts and no longer splurging on luxury’s.

    I suppose we could always fall back on Mineral excavation and extra – oh wait never mind Greens have banned it. Maybe drill more oil we … oh wait, nope that is banned too. What about our manufacturing indus … nope they have all packed up and left.

    Interesting times ahead.

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  4. Rod (180 comments) says:

    Surely this pulls the plug effectively on any neutron bomb planned for next week over JK’s alleged past dealings in the NZD. They will look trivial, even if true – which is, of course, unlikely.

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  5. expat (4,050 comments) says:

    The latest spread bet play to be touted in the press in London is trading the VIX ( a volatility index). Thats a fairly good indicator of how unstable things are.

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  6. OECD rank 22 kiwi (2,753 comments) says:

    Bailed out by the US. Will Hels be campaigning on that message?

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  7. expat (4,050 comments) says:

    It was in return for sending combat troops to the middle east in support of George Bush.

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  8. Yeti (64 comments) says:

    Ah, yes but this will do wonders for the current account deficit as we can’t afford to import anything anymore! Watch Labour spin how this is a good thing.

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  9. OECD rank 22 kiwi (2,753 comments) says:

    So Hels thinks Bush is tops now? Worth more that a couple of hand shakes? :D

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  10. dime (10,089 comments) says:

    last election all we heard about was US boogeymen backing national blah blah

    i wouldvt thought Mr Key had more ties to the US than Brash???

    anyway, havent heard anything about the US this time round..

    Helen is all about the cash!

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  11. Nigel (517 comments) says:

    I can’t see NZ being able to continue with it’s own currency, it’s to small & the fluctuations are only going to get worse.
    I just can’t see how we can sustain such a critical part of our economy having it’s value modified not by our economic fundamentals but by Hedge Funds, Mutual Funds & investors seeking interest rate arbitrage or just plain currency trading.
    The hard part is if you don’t have your own currency what do you peg to, my gut feel is it’s the Euro, certainly even a NZ/Oz dollar is to small & the US economy looks vulnerable.

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  12. OECD rank 22 kiwi (2,753 comments) says:

    Nigel, you peg to the Chinese yuan. ;-)

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  13. OECD rank 22 kiwi (2,753 comments) says:

    There is always the Zimbawean dollar if the the People’s Republic of China won’t have us.

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  14. Nigel (517 comments) says:

    ;) on the US Dollar, whoops Chinese Juan by another name

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  15. dime (10,089 comments) says:

    i dont wanna be pegged to no stinkin euro!

    any economists here want to explain the benefits of pegging our dollar to another currency? disadvantages too..

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  16. anonymouse (721 comments) says:

    Although, If you look over at a similar chart for the Ozzy, you will see the they have gone from almost Par (.98) to .66, a drop of about 33% in the same time, and infact they have fallen faster, hence why the NZ dollar has actually risen against the AUD.

    I heard a lovely catch phrase yesterday about the state of the international markets,
    ” It used to be about the return on your capital, now it is about the return of your capital”

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  17. labrator (1,850 comments) says:

    Nigel, my thoughts have always been that we peg to a basket of currencies which are related to our major exporting partners. I have no idea if this has some really great weaknesses related to it but I’m interested to know arguments against it. What we need is a stable currency that is free to move in relation with our major trading partners. What we’ve had is a miniscule currency which is easily distorted by significant cash movement and all of this movement has been as a result of the Reserve Bank Act.

    Dime the advantage I know of for us to peg our currency is that our dollar value is not distorted by currency traders looking for carry trades. We are just too small to have our own currency, can you imagine Sydney having their own currency? The disadvantage is that the market doesn’t get to decide the true value of our dollar and won’t reflect changes in our efficiency without government interference.
    (NB: I’m not an economist!)

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  18. djg (72 comments) says:

    we should have someone experienced in the world of currency trading to run the country

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  19. insider (1,028 comments) says:

    Where was John Key when this happened? We need ace private dick Mike ‘the hammer’ Williams on the case. There’s got to be undies to sniff somewhere.

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  20. Glutaemus Maximus (2,207 comments) says:

    Who gets the airpoints on these tax payer funded trips?

    Mike Williams needs to produce his dinner receipts for the excursion.

    Hope he hasn’t been treating himself and the extensive hunting party to fine wines at our expense?

    What do we think he has with 6 or 7 pies?

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  21. Nigel (517 comments) says:

    Labrator, That’s a nice idea regarding a basket, though going one step further I personally think currency fluctuations is one of the really major issues facing a global free market economy & as such it could well be the answer is a more global solution.

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  22. getstaffed (9,186 comments) says:

    Anyone (sane) picking bottom yet?

    Not me (I’m crazy…), but picking a bottom circa $US0.40

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  23. Chthoniid (2,047 comments) says:

    Wearing my economist’s hat for a second, the problem is that a stabilised currency ‘costs’. You need your Central Bank to ‘manage’ the currency to maintain the peg, and anytime there’s a disagreement with the fundamentals, the country takes a hit. The UK and Swedish experience with pegs in the early 90s ended up being very expensive.

    In short, the challenge with a peg is trying to decide what’s going to be worse- the cost of the volatility or the cost of management. NZ survived the currency speculation of the early 90s and in the 97 Asian crisis largely because we didn’t have a peg. It floated and the only way for speculators to make money is off other speculators. Introduce a peg and then speculators can make a lot of money at the expense of taxpayers. A peg is gambling that the exchange rate will never drift too far from the fundamentals. When it does, you create a money-pump from taxpayers via the Central Bank into the pockets of speculators. How much do you trust Cullen?

    Volatility is understandable at the moment, because no-one knows how much capital we’ll be able to keep getting from overseas to fund our current account (which has worsened again). If it dries up, then NZ has to get a turn around of 10bn on our net exports. We didn’t manage that when the currency was 39-40c per US. So potentially the dollar could fall a lot further than that. So, as soon as we know how much of the 10bn a year we currently borrow, can be borrowed in the future, we won’t know where the NZD is going to settle.

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  24. gd (2,286 comments) says:

    I never cease to be amazed at the reckless stupidity of politicans and civil servants when it comes to running the countrys finances

    Now I know Im one of many many citizens who have managed their finances in a responsible manner over many many years. I borrowed to buy long term capital assets always ensuring I had the income to pay both the interest and principal in full and on time.

    I have followed the Mr MaCawber formula as regards income and expenditure and always been able to pay my debts when they fall due

    As I say I am not alone In fact all the citizens I know act in the same manner.

    So WTF do pollies and civil servants who I pay large sums of money to run the economy like Mannys Music Parlour.

    What are they so incompetent reckless and stupid that they cant run a booze up in a brewery.

    If they cant/wont piss then get off the can and FOXTROT OSCAR

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  25. wreck1080 (3,956 comments) says:

    Dropped a lot against the US, but that is more to do with US strength than kiwi weakness.

    The kiwi is still pretty high against the pound, and the aussie.

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  26. dave strings (608 comments) says:

    So Hels thinks Bush is tops now? I thought she always did! Or do her friends shave?

    Maybe we should think about tying our currency to something stable. Like, erm, a gold standard maybe? Or perhaps ‘we guarantee to pay the bearer one litre of pure spring water in exchange for this coin when presented in undefaced condition” should be etched on our dollar!

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  27. Johnboy (16,994 comments) says:

    Glad I bought my new car two months ago. Shit I hate being a capitalist swine.

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  28. wikiriwhis business (4,114 comments) says:

    I guess here in NZ we can still afford to be philosophical about this situation. It’s the first time in a long time I’ve felt very fortunate to be living in NZ.

    I don’t share the confidence of some for the future predictions. The middle class is still there. Workers are feeling the pinch very realistically, losing their jobs and very close to Christmas (as usual). There wre probably some who thought they were going to make it to retirement, only to have their jobs snatched from their very grasps.

    I could analyse further, but I feel to wait for further developments. No point commentating until the situation develops more.

    Lets just let me repeat my prediction from my kiwi saver post that this Christmas is not going to see any spending records broken…. not even anywhere near.

    But on a more positive note, I do feel an anticipation about Christmas this year. seems to be at the forefront of everyones minds. perhaps a change of govt will give us all a fresh start to the new year ;)

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  29. Johnboy (16,994 comments) says:

    Im not really a capitalist swine. Just a normal common or garden swine.
    It was only a Mitsi not a Ferrari and then they shut the branch.
    Still shows you how the place is sinking under our wise Liarbour leadership

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  30. OECD rank 22 kiwi (2,753 comments) says:

    I think that the recession is going to keep on rolling. An entire year of negative growth, quarter on quarter is quite an impressive feat for Michael Cullen to achieve before being booted from office.

    What a legacy.

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