Reserve Bank intervenes in currency markets

May 8th, 2013 at 3:23 pm by David Farrar

NBR reports:

The says it intervened in foreign exchange markets in an attempt to drive the kiwi lower. It gave no details of the size of the intervention.

The kiwi tumbled to 83.90 US cents from 84.48 cents before governor Graeme Wheeler’s comments were telegraphed at the finance and expenditure select committee in Wellington. The trade-weighted index dropped to 77.71 from 78.17.

The comments come after Mr Wheeler said in a briefing for the six-monthly financial stability report today that the was “significantly overvalued”.

“That intervention will not materially change the level of the exchange rate but could take potentially the tops off rallies,” Mr Wheeler told the committee. “In terms of activity, there’s been an intervention.”

The size of the bank’s action would show up on its balance sheet, deputy governor Grant Spencer told the same meeting.

This is an independent decision of the Governor. It has happened once or twice before. I am skeptical of the ability of the Reserve Bank to move the level of the NZ dollar in the long-term as our reserves are much smaller than others. However if they have correctly calculated that the currency is over-valued, then they may take the edge off the dollar without it costing taxpayers money.

As I have said previously, I think the issue is more the weakness of the US dollar and the Euro, not the strength of the Kiwi.

Tags: , ,

19 Responses to “Reserve Bank intervenes in currency markets”

  1. martinh (1,257 comments) says:

    If Key had the balls to take on Len Brown and get land released in the Auckland region then there wouldnt be a need for this. Instead he goes after a public scapegoat in Gilmore and stops inquiries into things that would show him up himself for being a liar.
    Hypocrites a likeable people, not

    [DPF: Off topic, 20 demerits]

    Vote: Thumb up 1 Thumb down 11 You need to be logged in to vote
  2. Jack5 (5,007 comments) says:

    The privately owned Swiss central bank is successfully, and so far very profitably, capping the Swiss franc. Before it’s noted how much greater reserves Switzerland has, the Swiss have about double NZ’s population and about four times the GDP. They have smarter politicians than bankers than us, and a Calvinism-influenced national outlook to money.

    Perhaps we should be looking at moving from a free float. NZ may be just too small an economic entity to have a free-floating dollar amid volatile world currencies.

    Singapore has a successfully stabilised currency linked to a basket of trading partners’ currencies, and both Hong Kong and China’s currenices are pegged to the US dollar.

    Under Muldoon, the wheels nearly came off the NZ economy when we were linked to a basket of currencies, but the problem was our underlying economy and its management rather than the system.

    There’s no point in our clinging intently to a free float on mere monetary-theory grounds, like a defiant Monty Python knight having his limbs sliced off.

    Re Martinh at 3.47: what’s the link to the currency intervention, Martin?

    Vote: Thumb up 2 Thumb down 2 You need to be logged in to vote
  3. beautox (438 comments) says:

    So if Key had the balls to take on Len, speculators and investors all over the world would see the kiwi$ as less attractive and would not buy so many of them.

    How does that work then? Magic?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. martinh (1,257 comments) says:

    If house prices werent appreciating in Auckland then the prospect for future interest rate rises here would reduce and so would the currency.Not magic just economic, im happy to answer any more questions if you dont understand

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  5. martinh (1,257 comments) says:

    Jack currency is influenced by future interest rate prospects. House prices up, interest rates up, currency up.
    Little hypocrite Len is a big cause of this move by the reserve bank and little man key who is probably Lens height too isnt doing anything about it.
    Keys a Chicken chicken bock bock bock bock

    Vote: Thumb up 0 Thumb down 7 You need to be logged in to vote
  6. hmmokrightitis (1,585 comments) says:

    martinh, whatever youre drinking, its obviously really good. Keep going, I need a right giggle.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  7. Michael (903 comments) says:

    You might as well try to keep the tide out with a pitchfork – the NZ Dollar is going up because of several reasons, the Reserve Bank does not have the resources to stop it.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  8. dog_eat_dog (776 comments) says:

    We should totally cripple consumer spending power and disproportionately affect lower income households by deliberately crippling our exchange rates.

    I’m sorry, which side is arguing in favour of this again?

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  9. martinh (1,257 comments) says:

    Yes Michael but the govt does.
    But right hon headless chicken Key wont use these tools as hes yellow.
    So instead people who are struggling to get a mortgage for their first home have just had their dreams made harder

    Vote: Thumb up 0 Thumb down 3 You need to be logged in to vote
  10. martinh (1,257 comments) says:

    So dog, what proportion of their spending power do these poor people spend on rent/mortgages due to high house prices?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. Pongo (371 comments) says:

    Would Wheeler stop his nonsense, I am off to the States in August and could do with the big spending power from the mighty KIWI.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  12. SPC (5,573 comments) says:

    Usually there is a little money to be made at the top of the value cycle, but this time the recent cut in the Oz cash rate has increased the risk of our dollar rising against the Oz one. However our dollar should still follow an Oz fall against the American.

    So once our OCR rises (this year or next) then we will be returning to the days when a higher local OCR led to our dollar going over 90 cents Oz (and those exporters benefiting from their Oz market are going to hurt like the others have done). At this point it would be time for a Green Labour announcement about plans to reduce the value of the dollar … .

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. expat (4,048 comments) says:

    SPC it would only take the prospect of a labour green cluster fuck government to rat fuck the economy and the dollar

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. ross69 (3,652 comments) says:

    Imagine if Labour or the Greens tried to manipulate the NZ dollar. Goodness, there would be comparisons to Hugo Chavez and North Korea. It’s refreshing to know that “intervention” is no longer a dirty word.

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  15. expat (4,048 comments) says:

    Ross you have no idea.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  16. krazykiwi (9,189 comments) says:

    Rebound please. I’m off to Oz soon and a weakened NZD isn’t what I wanted.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. Camryn (555 comments) says:

    I have a large sum of US$ I’m waiting to move down. Not just vacation spending money… it’s deposit for home. So… good stuff!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. krazykiwi (9,189 comments) says:

    Camryn, with Obama firing up the printing presses, you’ll need a good tent down here in the meantime.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. Ross Nixon (614 comments) says:

    Camryn, don”t wait too long. Otherwise the money will only buy you a tent. The US$ is doomed.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.