New Zealand dollar 'significantly overvalued', RBNZ’s Wheeler says

The New Zealand dollar, which has gained 11 percent from its lows a year ago on a trade-weighted basis, is "significantly overvalued," Reserve Bank governor Graeme Wheeler says.

He made the comments at a media briefing in Wellington following the release of the bank's six-monthly financial stability report, which 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.

The trade-weighted index dipped to 78.04 from 78.19 before Wheeler's comments. The kiwi traded at 84.35 US cents from 84.50 cents.

BusinessDesk.co.nz

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