Wednesday 8th May 2013
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The Reserve Bank of New Zealand says it intervened in foreign exchange markets in an attempt to drive the kiwi lower. It gave no details of the size of the intervention.
The kiwi dollar tumbled to 83.90 US cents from 84.48 cents before his comments were telegraphed at the finance and expenditure select committee in Wellington. The trade-weighted index dropped to 77.71 from 78.17.
The comments come after governor Graeme Wheeler said in a briefing for the six-monthly Financial Stability Report today that the currency was "significantly overvalued."
"That intervention will not materially change the level of the exchange rate but could take potentially the tops off rallies," Wheeler told the committee. "In terms of activity, there's been an intervention."
The size of the bank's action would show up on its balance sheet, deputy governor Grant Spencer told the same meeting.
The TWI has gained 11 percent from its lows a year ago, helping keep imported inflation at bay but hurting returns in the tradables sector.
The stability report highlighted the risks of an overheating housing market.
The bank expects to sign a memorandum of understanding with Finance Minister Bill English shortly to add macro-prudential tools to its interest rate lever in keeping inflation tame and the economy on track. It stands ready to impose loan-to-value limits on the riskiest mortgage lending should it be deemed a "significant risk" to New Zealand's financial stability, he said.
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