NZ dollar drops after RBNZ’s Wheeler keeps currency intervention option open
By Paul McBeth
May 7 (BusinessDesk) - The New Zealand dollar fell after Reserve Bank governor Graeme Wheeler said he may intervene in
currency markets if the kiwi stays strong in the face of falling dairy prices.
The local currency dropped to 86.89 US cents from 87.41 cents immediate before the speech, 87.47 cents at 8am and 86.91
cents yesterday. The trade-weighted index fell to 80.43 from a post-float high 81.21 in Northern Hemisphere trading and
80.72 yesterday.
RBNZ’s Wheeler told a dairy conference in Hamilton the currency was still overvalued, and “it would become more
opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars” if the kiwi remains high
while commodity prices fall. The speech came after dairy prices at Fonterra Cooperative Group’s GlobalDairyTrade auction
fell for a sixth time, fuelling speculation the world’s biggest dairy exporter will reduce its forecast payout to
farmers.
“We suspect it was a reminder from the RBNZ that there are currency concerns in the economy and that they do have
options,” said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. “It should take the edge off it (the
kiwi dollar’s strength) a little bit – you’ve got to respect the central bank.”
The local currency rose against a weak US dollar in New York trading yesterday, touching a three-year high against the
greenback.
Federal Reserve chair Janet Yellen is giving testimony to the Joint Economic Committee at Congress on Wednesday in
Washington, and investors will be looking for insights into her thinking about the strength of recent US data.
Traders largely ignored New Zealand’s employment figures, which showed stronger than expected quarterly jobs growth of
0.9 percent and a record participation rate, which kept the unemployment rate unchanged at 6 percent.
The kiwi fell to 93 Australian cents from 93.63 cents yesterday after retail sales rose 1.2percent in March, below
expectations. The Reserve Bank of Australia noted improving consumer demand in yesterday’s monetary policy review, which
kept the key rate at 2.5 percent.
The local currency fell to 88.29 yen at 5pm in Wellington from 88.67 yen yesterday, and declined to 62.38 euro cents
from 62.59 cents. It dropped to 51.17 British pence from 51.45 pence.
(BusinessDesk)