RBNZ moves to weaken Kiwi dollar
(3 June 2013 – New Zealand) In April The Reserve Bank of New Zealand (RBNZ) attempted to weaken the country’s currency by selling NZ$256 million (A$213 million).
It was the biggest monthly intervention since May 2008.
Figures from the RBNZ showed that the net New Zealand dollars bought by the bank was net sales of NZ$256 million – the central bank buys and sells currency frequently, only disclosing the net position at the end of the month.
RBNZ governor Graeme Wheeler took the unusual step of confirming the bank was intervening in the markets to try to weaken the currency this month.
Friday’s figure is not one of the largest on record; in July 2007 the bank sold almost NZ$1.5 billion, having sold NZ$736 million the previous month.
Between February and May 2008, the bank sold more than NZ$1.5 billion.
This month was the only time since mid-2007 that the central bank admitted that it was intervening to try to affect the currency.
In a speech to the Auckland Institute of Directors, Wheeler said the New Zealand dollar was 'significantly overvalued' with investors apparently overlooking a number of risks, including a high current account deficit and the risk of a sharp correction.
The bank had been responding both by keeping the Official Cash Rate (OCR) at a historically low level (of 2.5 percent) 'and through a degree of currency intervention'.
The intervention was to 'try and dampen some of the spikes in the exchange rate'.
'But we are also realistic,' Wheeler said.
'We can only hope to smooth the peaks off the exchange rate and diminish investor perceptions that the New Zealand dollar is a one-way bet, rather than attempt to influence the trend level of the kiwi.'
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