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The New Zealand dollar edged up following its dramatic slump yesterday after the Reserve Bank confirmed speculation it intervened in the currency market last month, selling the kiwi in an attempt to push its value down and benefit exporters, and Prime Minister John Key suggested a “Goldilocks” level far lower than at present.
The kiwi regained some ground overnight and was trading at 77.69 cents at 8am in Wellington, from 77.45 cents at 5pm yesterday. The trade-weighted index rose to 75.80 from 75.61 yesterday.
The New Zealand dollar has declined from a peak of 88.35 US cents in July after Reserve Bank governor Graeme Wheeler said the high level was unjustified and unsustainable, language signalling he was considering intervention. Wheeler confirmed in the central bank’s monthly release of foreign exchange data yesterday that he did intervene in the market last month, selling a net $521 million to push it lower.
“The fact the RBNZ actually committed capital to formal intervention shows the seriousness of New Zealand authorities in depreciating the value of the currency,” Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York, said in a note. “The kiwi is therefore likely to remain under heavy selling pressure as markets will fear further intervention actions by the central bank.
“However, the unit which now is almost in a free fall, has become grossly oversold.”
Finance Minister Bill English told Radio New Zealand today the high local currency had made it difficult for a lot of export industries to do well and the recent fall in the currency meant that headwind is now reducing in strength. His comments follow Prime Minister John Key noting yesterday that he preferred a lower currency, noting the ‘Goldilocks’ rate – neither too high nor too low – was probably about 65 US cents.
Today, New Zealand has building consent data for August at 10:45am, the ANZ business confidence survey at 1pm and household credit data for August at 3pm.
Traders will also be eyeing the release of the HSBC final manufacturing PMI this afternoon, to gauge activity in New Zealand’s largest trading partner, China.
The New Zealand dollar was little changed at 88.96 Australian cents from 88.97 cents yesterday.
The kiwi advanced to 61.21 euro cents from 61.08 cents ahead of the release of European unemployment and inflation data today, a manufacturing report tomorrow and the European Central Bank decision on Thursday.
The local currency edged up to 47.80 British pence from 47.72 pence yesterday ahead of the latest estimate of UK second quarter GDP today.
The New Zealand dollar gained to 85.02 yen from 84.71 yen yesterday ahead of data on Japanese retail sales, industrial production, unemployment and household spending.