Kiwi’s strength becoming a worry, Key says

Kiwi’s strength becoming a worry, Key says

By Pattrick Smellie

Oct. 11 (BusinessDesk) – The continuing rise of the New Zealand dollar is reaching levels that will be of concern to exporters, but there is little the government can do, says Prime Minister John Key.

“We always have some concerns when our currency starts to get to a level where it’s starting to create concerns for some of our exporters,” Key said at his weekly post-Cabinet press conference. “But it’s a very difficult position for the Reserve Bank and the government” as the rising dollar reflected American economy weakness.

In recent days, the kiwi has been pulled up with the Australian dollar, which appears likely to reach parity with the U.S. dollar sometime this week, while the American currency continues to show fundamental weakness.

A BusinessDesk weekly survey of foreign exchange analysts today found unanimous expectation that the kiwi would continue to rise this week.

The New Zealand dollar is trading above 75 U.S. cents, its highest level since October last year, and compares with lows around 67 cents in May this year. The US/NZ dollar exchange rate did go higher, to above 79 U.S. cents, in April 2008. It recently traded at 75.40 cents, from 74.85 cents on Friday in New York.

There were some benefits to the strong kiwi, said Key, including lower inflationary pressure and less prospect of interest rates rising.

Key said the world needed China and the U.S. to reach a common position on the relative strength of both countries’ currencies rather than what is currently being called a “currency war” in which both want weak currencies to sustain export growth, along with most of the Eurozone.

“You need a strengthening of the U.S. consumer base,” he said. “Both the U.S. and China need that.”

(BusinessDesk)

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