NZ exchange rate

July 9th, 2013 at 9:00 am by David Farrar

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So we’ve had politicians complain for the last year that the exchange rate is too high and that the NZ Government must either print money or spend billions intervening in the exchange rate to lower the dollar.

Stuff reports:

Mike Jones, a currency strategist at BNZ, said he expected the kiwi to trade between US76c and US80c in the next three to six months, based on the gyrations of the global economy.

But the general rule at the moment is based on a simple formula: the better the economic data out of the United States, the further the kiwi will fall.

Which is why calls for us to intervene are misguided. It’s like trying to stop a river with a couple of stones.

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22 Responses to “NZ exchange rate”

  1. PTM (47 comments) says:

    Give it a few days and Russel and one of the Davids will be bleating about the effect of rising costs of imported goods on the poor and the need to raise benefits and the minimum wage to compensate.

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  2. Auberon (873 comments) says:

    To be fair David, Russel Norman is reputed to have a couple of really big stones ;-)

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  3. MT_Tinman (3,184 comments) says:

    Auberon (755) Says:
    July 9th, 2013 at 9:10 am
    To be fair David, Russel Norman is reputed to have a couple of really big stones

    Now why do I doubt that? ;-)

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  4. nasska (11,478 comments) says:

    Finally it’s us, the poor old sheep & beef farmers, who are going to have a turn at the trough.

    Eat your hearts out townies! :)

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  5. kowtow (8,439 comments) says:

    Petrol will go sky high.

    Pushed further by taxes,some of which are intended to stop the oceans rising…….yeah right.

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  6. Alan Johnstone (1,087 comments) says:

    The NZD is dragged up and down alongside the AUD against the USD. It’s really that simple.

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  7. Manolo (13,746 comments) says:

    About time to drop the ETS tax, the absurd concoction from Smith and Key, and give motorists some relief in petrol prices.

    Hell will freeze over first.

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  8. Cunningham (844 comments) says:

    “Which is why calls for us to intervene are misguided. It’s like trying to stop a river with a couple of stones.”

    Not entirely true DPF. If the Greens get in, print money and cause enough damage to our economy then the dollar will fall as everyone pulls out of our economy. Of course we would all be up shit creek but they would have achieved their goal.

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  9. Ultima (29 comments) says:

    I only hear politicians wanting to intervene when the currency is high, but not when it is low. Not long ago, during the last Labour government (2nd term i think), there was a time when the rate was around US39c. Clark and Cullen didn’t want to intervene then.

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  10. Simon (720 comments) says:

    “While Reserve Bank Governor Graeme Wheeler took the unusual step of confirming the bank was intervening in the markets to try to weaken the currency this month

    The Reserve Bank sold $256 million in April in an attempt to weaken the currency, the biggest monthly intervention since May 2008.” 30 May 2013.

    Speaking in Timaru today, Prime Minister John Key said he supported the Reserve Bank taking action which was ”appropriate and necessary”

    http://www.stuff.co.nz/business/industries/8735081/Biggest-RBNZ-intervention-in-5-years

    “Which is why calls for us to intervene are misguided.”

    Its a one party state ladies and kiwi blog is now nothing but part of the apparatchik for the sheeple.

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  11. wreck1080 (3,905 comments) says:

    The Reserve bank sold NZD in april , and , look what happened to the dollar since then (0.86 to 0.78). Your graph could be interpreted that the governments intervention has worked perfectly by introducing uncertainty — and, nothing currency traders hate more than uncertainty. It ruins their positions.

    And your graph is misleading , the kiwi has been lower than todays rate (.78) for 15 out of the last 18 years or so. And, much of that includes the peak of the last 2 years.

    You ignore the TWI which is more representative of overall value.

    But, you do have a habit of making the relative level of the dollar by excluding historical information .

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  12. Ross Nixon (559 comments) says:

    If you want historic information, lets go back to the 1970s when $NZ1 bought $US1.15

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  13. unaha-closp (1,164 comments) says:

    But the general rule at the moment is based on a simple formula: the better the economic data out of the United States, the further the kiwi will fall.

    Since the economic data out of the USA is a litany of crap, this would suggest that the data for NZ is really bad.

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  14. Ross Nixon (559 comments) says:

    Some very interesting historical graphs and commentary here. http://www.rbnz.govt.nz/research_and_publications/seminars_and_workshops/mar2013/5200816.pdf

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  15. thedavincimode (6,759 comments) says:

    I demand an inquiry.

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  16. wreck1080 (3,905 comments) says:

    @ross : The New Zealand dollar was not floated on an open market back then so your example is irrelevant.

    I’m not totally sure how it was set back in the 70’s, but I think it was artificially pegged at some level . Then, to get fx you had to go to the government ( at least i think it was something like that).

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  17. wreck1080 (3,905 comments) says:

    @ross : that is a great document. It does exclude the massive increases over the last 2 or 3 years so I would think it would infer the NZD is 20-30% above average levels if it extended to today.

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  18. chris (647 comments) says:

    @wreck – You’re pretty close. Here’s a copy n paste from Wikipedia, from after decimalisation

    The New Zealand dollar was initially pegged to the US dollar at US$1.62 = NZ$1. This rate changed on 21 November of the same year to US$1.12 = NZ$1 after the devaluation of the British pound (see Bretton Woods system), although New Zealand devalued more than the UK.[6]

    In 1971 the US devalued its dollar relative to gold, leading New Zealand on 23 December to peg its dollar at US$1.216 with a 4.5% fluctuation range, keeping the same gold value. From 9 July 1973 to 4 March 1985 the dollar’s value was determined from a trade-weighted basket of currencies.

    The NZ$ was floated on 4 March 1985 at the initial rate of US$0.4444. Since then the dollar’s value has been determined by the financial markets, and has been in the range of about US$0.39 to 0.88.

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  19. dime (9,972 comments) says:

    As an importer, I can tell you that anything under .65 is going to be painful.

    It used to be the norm, but productions costs have gone up big time in the last 5 years. The high dollar has been offsetting that. importers/ retailers will soak up a bit of the drop.

    Most decent importers will have decent forward cover, so price increases wont be felt straight away.

    I think plasmas, fridges etc will be the exception though.

    The high dollar has also offset higher margin requirement from retailers.. who are offsetting huge rent increases.

    In saying that, we will adapt! sell less units, same turnover :P

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  20. James Stephenson (2,173 comments) says:

    To be fair David, Russel Norman is reputed to have a couple of really big stones

    You misheard, in fact when he game up with the last couple of big policies, he was really stoned.

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  21. slijmbal (1,236 comments) says:

    “Since the economic data out of the USA is a litany of crap, this would suggest that the data for NZ is really bad.”

    ahh but we’re talking relative amounts of crap …..

    Shearer’s forgotten money should be coming home soon then ……..

    I’ll be doing the same when it hits about .70c if it keeps going.

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  22. wreck1080 (3,905 comments) says:

    how do we embed images into posts?

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