New Zealand dollar falls ahead of central bank report on financial stability

The New Zealand dollar fell ahead of a report by the central bank today which may flag concern about the country’s buoyant housing market and the impact of a high currency on exporters.

The kiwi fell to 84.59 U.S. cents from 84.94 cents at 5pm in Wellington yesterday, while the trade-weighted index dropped to 78.26 from 78.58.

Traders will be paying attention to New Zealand’s six-monthly financial stability report this morning, which may give some insight into the Reserve Bank’s thinking on how it will use macro-prudential tools to head off an asset bubble. New Zealand’s central bank has to contend with a high exchange rate eating into export receipts, while at the same time containing a resurgent housing market in the nation’s biggest city, Auckland.

“We are seeing some stalling in the upward movement in the currency,” said Stuart Ive, senior trader at HiFX in Auckland. “The RBNZ would like to see it lower and so would exporters.”

Ive said the kiwi could fall as low as 83.50 US cents this month and is struggling to go above 86.80 cents.

“As we edge down towards these lower levels, it would be good levels to get some cover on,” for exporters, he said. “I don’t think it’s starting on a big sell off until we get the global stimulus taken off” which is not likely until next year, he said. New Zealand’s economy is still tracking “reasonably well.”

The kiwi fell even as stock benchmarks in the US and Germany reached new record highs. It edged down to 83.02 Australian cents from 83.50 cents late yesterday, a four-year high it reached after the Reserve Bank of Australia unexpectedly cut its cash rate to 2.75 percent from 3 percent, narrowing the gap with New Zealand’s 2.5 percent official cash rate.

The kiwi fell to 64.67 euro cents from 64.92 cents and was little changed at 54.62 British pence. It fell to 83.76 yen from 84.15 yen.

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