"If we see opportunities to make a difference and create uncertainty about the future direction of the exchange rate in traders' minds, then we would be prepared to intervene"
- Graeme Wheeler, New Zealand central bank Governor
The New Zealand Dollar was the biggest looser last week, falling more than 2% against the major peers and posting the longest run of weekly declines against the Aussie in more than a year as the Reserve Bank of New Zealand signalled its hesitation to increase borrowing costs. On Friday RBNZ Governor Graeme Wheeler expressed his opinion that there is no opportunity currently to intervene in the financial markets to curb a very strong domestic currency. He warned that the Kiwi, which hit a five-month high versus the greenback earlier this week, is weighing on the nation's exporters and slowing economic expansion. During September's policy meeting the RBNZ pledged to keep interest rate at current level for the rest of 2013, and introduced limits on low-deposit home loans in order to counter property inflation.
House-price inflation is currently hovering at the highest since early 2008, fuelled by a housing shortage in cities like Auckland and Christchurch. Risks for the economy are high; however, the RBNZ has limited resources to sell the currency to make any impact on the markets, and hence, they are waiting for the right circumstances. Moreover, the RBNZ stressed out it would be taxpayers' money the central bank would be putting at risk. Taking it all into account, there is practically no chance the RBNZ would make any adjustments to its policy on October 30 and would keep interest rates at current level of 2.5%.
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