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The New Zealand dollar powers higher against the AUD and EUR, pushing the TWI-5 to over 80 again

Currencies
The New Zealand dollar powers higher against the AUD and EUR, pushing the TWI-5 to over 80 again
<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The New Zealand dollar has ended the week on a high.

In fact, final trading in New York today saw the Kiwi dollar at 97.53 AUc a record post-float high.

And it ended at 69.93 euro cents, also a record post-float high.

Both represent the highest the New Zealand dollar has traded with these currencies since March 1985 when when our currency was freely floated.

It rose against other main pairs as well, although no other set was an all-time record.

It ended the week at 75.63 USc, 90.8 Japanese yen, 4.69 Chinese renminbi, and 50.6 British pence.

The rise will concern the Reserve Bank who have repeatedly claimed our currency is unjustifiably high.

But they are unlikely to try and talk it down because of their unfortunate recent experience; whenever they try, it seems to go up.

This is what they said on March 12, 2-015 when they issued their latest Monetary Policy Statement:

On a trade-weighted basis, the New Zealand dollar remains unjustifiably high and unsustainable in terms of New Zealand’s long-term economic fundamentals. A substantial downward correction in the real exchange rate is needed to put New Zealand’s external accounts on a more sustainable footing.

Since then, the TWI-5 has risen +2.6%.

And since then, both our Current Account data for the December quarter has been released, and the GDP data for the same period. Neither showed any special currency-related concerns.

Th RBNZ are in a tough spot. They do not have the resources to sustain any market intervention. And the liquidity policies of many major economies are working to lower their values, especially from China, Japan and the Euro Zone.

Other major currencies are suffering from elevated levels as well, including the US dollar, and they also seem unable to stem their rises. What chance does the RBNZ have?

Our high currency is having little negative impact on our economy. Economic growth is strong and it looks like it is staying above trend for all of 2015. Employment levels are strong. And key industries seem to be able to sell their products. While local manufacturers would like a lower exchange rate, factory confidence levels as measured by the PMI are high by world standards and the sub-indexes for output are especially strong.

Neither does the tourism industry appear to be suffering because of the 'high dollar' - a regular complaint from them in previous business cycles.

And the fast-growing education sector which could also potentially be impacted by a high currency is showing no ill-effects at all.

On the flip-side, a high currency makes our imports less expensive and generally these lower purchase costs flow though to consumers. While wage rises may be modest, inflation is very low (including for food costs) and that means 'real wages' are rising.

Some may ask, What's not to like ?

 

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Source: CoinDesk

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4 Comments

The RBNZ could consider delivering a sudden unscheduled surprise 100 bps cut to the OCR to shift market expectations out of its predictive channels.  

 

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They may well do MB. I have said here recently that the RBNZ, in its desperation to profit fontera and real estate agents - their facinations since 2002, is likely soon to resort to a delinquent act to wound the NZD. 

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Some may ask, What's not to like ?

 

The short road to elite enabled fascism. HT Kate

 

The Government wants a mixed governance structure for Environment Canterbury (ECan), with some members elected and others appointed, it has announced.

Environment Minister Dr Nick Smith and Associate Local Government Minister Louise Upston released a discussion document on the proposal on Wednesday.

"We are proposing a mixed governance model... with seven members elected across Canterbury at the local elections in October 2016 and six appointed by Government," Smith said.

"[It] enables a majority of elected representatives while ensuring continued momentum on the Canterbury Water Management Strategy and earthquake recovery work," he said.

"We considered other options of a fully elected council and alternatives that involved substantive changes to council functions.

"Our preliminary view is that these carry too many risks given the critical stage of work on the Canterbury Water Management Strategy and the earthquake recovery.

"It may be appropriate to consider these options beyond 2019."  Read more

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We should have the lowest interest rates in the Western world, not the highest. Our economy is not the star that the govt is making it out to be. The Bollard experiment is doomed to fail - there is no inflation, commodity prices are sliding and we are a welfare state. Without the Christchurch quake we would be looking quite sick. So it is no wonder the exchange rate is performing the way it is while we have our interest rates cranked up artificially to the highest levels compared with USA, Europe, UK, Canada and Australia. We need lower interest rates in order to stimulate business activity and we need them now!

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