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The Kiwi dollar heads higher, pushed up by remarks from the RBA Governor

Currencies
The Kiwi dollar heads higher, pushed up by remarks from the RBA Governor
30th Jul 13, 4:34pm by David Chaston
RBA Governor Stevens today reset expectations for the AU$.

The NZ dollar is now buying more than AU$0.88, its highest since October 2008.

This follows a speech by RBA Governor Glenn Stevens today.

The record post-float high was NZ$1 = AU$0.9115 on October 16, 2008.

Stevens all but confirmed rate cuts are imminent in Australia. He reviews their cash rate next Tuesday, August 6, 2013.

Stevens said inflation would be no bar to a cut in interest rates if needed to support the economy, while highlighting the challenges ahead as their long boom in mining investment comes to an end.

He played down concerns that rising home or asset prices might stand in the way of a cut, saying that low rates were intended to nudge investors toward taking slightly more risk.

Click on the AU$ tab in the chart below to see the trend.

No chart with that title exists.

 

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11 Comments

by  Stephen Hulme  |  30th Jul 13, 5:52pm 1375163577

What was the RBNZ Governor to do?

 

The Reserve Bank did however drop its description of the New Zealand dollar as 'over-valued', instead describing it just as 'high', given its fall in the last two months. Read more

 

Let the NZD/USD pair languish just above 0.7800 and ignore the rising spread between the FX swap-implied rate and the OCR? Dislocation in one market called for action in another. Do the associated costs of a higher value NZD/USD pair compensate for constant uninterrupted dependence on wholesale foreign borrowing? Read more

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by  Stephen Hulme  |  30th Jul 13, 6:05pm 1375164341

By implication the asymmetrical outcomes associated with currrency swapped  wholesale foreign borrowings have made it a great time to clean up in the outright and cross rate NZD FX markets. Somedays you just have to thank both the banks and regulators for their efforts in all directions. Too bad about the exporters - no doubt the sharper variety are on to it and well long KIWI.

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by  iconoclast  |  30th Jul 13, 6:29pm 1375165749

The power of the jawbone

A week ago Wheelman Wheeler flapped his jaw and the NZD rose 100 pips against the AUD

Today Glenn Stevens flapped his jaw and the AUD fell 100 pips against the NZD

In the space of 1 week the NZD is now 200 pips up against the AUD

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by  Stephen Hulme  |  30th Jul 13, 6:49pm 1375166982
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by  Gummy Bear Hero  |  30th Jul 13, 7:03pm 1375167797
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by  Your Landlord  |  30th Jul 13, 7:32pm 1375169567

I think a few of the interest.co.nz bloggers might be in those pics Gummy.

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by  Matt in Auck  |  30th Jul 13, 9:11pm 1375175463

Not good this for nz exporters and tourism. Air asia has opened up in aus and many of my workmates and acquaintance's are now talking holidays to asia not nz. I expect the currencies could get quite close to parity if RBA cut

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by  JB  |  31st Jul 13, 7:22am 1375212138

Australia remains NZ's largest export market and the one currency that hadn't appreciated dramatically in the last few years. Current rates simply guarantee a current account blow out down the track as it is already heading south from high levels.

We simply cannot go on borrowing or floging assets to pay the interest on our foreign debts which is what we are doing by definition with a trade deficit.

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by  steven  |  31st Jul 13, 9:18am 1375219137

We are glued to the Ozzie, so its more likely without some over-riding change the difference stays roughly as it is, we both drop.

So where is the difference that yoou see?

regards

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by  Boatman  |  31st Jul 13, 11:33am 1375227192

Do you remember Fonterra having to rent temporary warehouse space to stockpile milk powder they could not sell because of the exchange rate  in 2008/2009 ?

ThisAUS$/NZ$ exchange rate is already hurting non- dairy exporters and tourism.

It will eventually start to impact on dairy exports. 

Could we see a milk powder mountain in storage like 2008 /2009?

The Government will only react when the all powerful Fonterra  starts to complain to governmet , and Fonterra will start to complain very soon , when the exchange rate goes over 90cents to the Aussie ,  if they have not done so already

Who knows , we could even see a further OCR cut just to get the currency down .

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by  Stephen Hulme  |  31st Jul 13, 11:48am 1375228100

Fonterra will start to complain very soon , when the exchange rate goes over 90cents to the Aussie ,  if they have not done so already

 

Do you equate this news as a complaint or plain stupidity fighting the forces of reality?

 

Fonterra has lifted its forecast farmgate milk price rice for the  2013-14 season by 50 cents to $7.50 per kg of milk solids and announced an estimated dividend of NZ32c per share - amounting to a forecast cash payout of NZ$7.82.

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