By Bernard Hickey
Finance Minister Bill English has said the Reserve Bank has not yet signaled a significant intervention in the New Zealand to the government.
He was asked about an intervention of a larger scale after Reserve Bank Governor Graeme Wheeler said in a speech earlier on Thursday the bank was "prepared to scale up our foreign exchange activities if we see opportunities to have greater influence".
English made the comments just before the Reserve Bank disclosed it sold NZ$256 million worth of currency in April, confirming its comments on May 8 that it had intervened in a limited way in April. Wheeler said earlier this month the bank had intervened in a limited way last month to knock the top off the rally in the currency, which has since sunk against the US dollar. The April intervention was the largest since it sold NZ$511 million in May 2008 under previous governor Alan Bollard. The Reserve Bank sold NZ$2.25 billion in its first two months of larger scale intervention in June and July of 2008, including a record NZ$1.489 billion in July 2008.
"In the long run you can't pick your currency level, but the RB has sometimes intervened to knock the peak off the exchange rate," English told reporters in parliament when asked about the prospects for larger scale intervention.
"We would expect to be briefed about that kind of risk to the Crown, if there is a risk to the crown's balance sheet, and we haven't had any discussions with them about that," English said when asked about larger scale intervention.
"We've made it pretty clear we don't believe it's worth taxpayers taking substantial risks around trying to manage the exchange rate," he said, when asked about the potential balance sheet risks of a major Reserve Bank intervention.
"We haven't had that discussion, so I couldn't comment on what he might mean by that," he said when asked about the Governor's comments about the scale of such intervention.
The last major Reserve Bank intervention was in late 2007 and early 2008 under the previous Labour Government. Back then the Reserve Bank sold NZ$3.9 billion of New Zealand dollars in the year to May 2008.
(Updated with background, links and chart; RBNZ disclosure)
No chart with that title exists.
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"We would expect to be briefed about that kind of risk to the Crown, if there is a risk to the crown's balance sheet, and we haven't had any discussions with them about that," English said when asked about larger scale intervention.
"We've made it pretty clear we don't believe it's worth taxpayers taking substantial risks around trying to manage the exchange rate," he said, when asked about the potential balance sheet risks of a major Reserve Bank intervention.
So that's that then. Wheeler jawboning about tiddlywinks sized intervention serves only to highlight the "storm in a teacup" nature of the current headlines - what's really going on here?
Whats going on here..? ...u ask
I see a possum caught in the headlights ... that is our exchange rate.
With the OCR ...Wheeler must feel like he's holding a hand grenade ... rather than a tool to maintain price stability.
He'll try everything else... before he pulls the pin.... and won't pull the pin while his is the only Central Bankers head that is poking above the trenches..
House prices will sing to their own bullish tunes... and Wheeler may have some sleepless nights ..in the future.... maybe dreaming about bankquakes...and stability cracks.
One thing the GFC did show.... is that when it comes to Central Bankers.... they are kinda hanging on for the ride....just like the rest of us.... and they are not really the bus drivers we might have thought they were... and if they are..they have bad eyesight .
Roelof, I was not expecting an answer to a rhetorical question - but in respect of the pitfalls associated with devaluing the NZD versus the currencies of our trading partners, I suggest a read of this informative post from Sean Corrigan - an Austrian, but nonetheless a pragmatist. Read more
Thanks for the link... Nothing wrong with Austrian... or pragmatists
Check this out.. Kyle Bass ..Japan crossing the Rubicon ..from page 16 onwards.
http://www.scribd.com/doc/113621307/Kyle-Bass
"They know not what they wish for "... was Kyles response to the BOJs' holding hands with the Finance Minister... going down the road of Monetization.... to fund deficits and devalue currencies.
Central Bankers don't have any answers.... and I wonder if they really understand things in terms of first principles.,.. ( I prefer to listen to "practical economists" who put their money on the line every day )
Japan is f**ked... and what they are doing is madness. ( in my view)
Maybe NZ will follow their lead..
Interview with Kyle:
http://www.creditwritedowns.com/2013/04/kyle-bass-gets-it-wrong-on-japanese-bonds.html
Max Keiser - New Zealand opens new front in currency war:
"It's a global currency firing squad. All the fiat currencies are lined up in a circle and they've got their currency print button ready to go and they print print print. And they are all trying to devalue concurrently so that nobody is the loser...Japan is the country that shows up and will enter into a hyperinflationary spiral."
http://www.maxkeiser.com/2013/05/new-zealand-opens-new-front-in-currenc…
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