-Rob Rennie, chief currency strategist at Westpac
The Reserve Bank of New Zealand is changing how it calculates the Trade-Weighted Index, by broadening the currency basket it uses to calculate the value of the Kiwi dollar, to better reflect the nation's trading relationships. Starting from December 11, the number of currencies in the benchmark trade-weighted index will increase to 17 from five, the RBNZ said. The updated TWI will include China, New Zealand's trading partner, as well as Australia, the US, the Eurozone, Japan, Singapore, the UK, South Korea, Malaysia, Thailand, Indonesia, India, Canada, Taiwan, Hong Kong, Vietnam and the Philippines. Foreign exchange market participants think the chance of Reserve Bank of New Zealand intervention to weaken the Kiwi Dollar remains very high even after the currency has depreciated by 10% from the highest level in 32 years at the beginning of July.
In the meantime, the New Zealand Dollar slumped from 79.5 US cents to below 78.8 US cents, after the central bank accidentally republished a September 25 release that had said the New Zealand dollar's value was "unjustified and unsustainable". New Zealand's central bank tends to release statements on a more irregular basis than the Reserve Bank of Australia, and the September press release itself was a surprise.
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