NZ dollar falls more than 1 USc after Bank of Japan intervenes to drag yen lower vs US dollar; joins Swiss National Bank; no sign of RBNZ intervention

The New Zealand dollar fell more than 1 USc to 85.3 USc in afternoon trade as currency markets globally were convulsed by central bank intervention.

The local currency's sharp fall vs the US dollar followed hard on the heels of early afternoon (NZ time) intervention by the Bank of Japan to pull the yen lower. The yen weakened against the New Zealand dollar. 

See more here at Reuters on the Yen intervention.

The Japanese intervention followed a surprise intervention overnight by the Swiss National Bank to push the Swiss Franc down from record highs against the US dollar.

The Swiss National Bank slashed its cash rate to 0% and warned it was determined to help its exporters survive by intervening to drag its currency down.

Talk has grown in recent days that the US Federal Reserve will embark on a third round of Quantitative Easing or money printing known QE III to revive a stalling US economy.

This would also have the effect of devaluing the US dollar against other currencies.

A spokeswoman for the Reserve Bank of New Zealand said the bank did not comment on whether it had intervened in the foreign exchange market.

The Reserve Bank intervened in 2007 when the Trade Weighted Index got over 77, but Reserve Bank Governor Alan Bollard and Prime Minister John Key have recently both commented that exchange intervention was not effective.

See more here from Key on intervention from Tuesday.

See more here from Bollard on June 9 on intervention.

'We acted alone'

Meanwhile Bloomberg reports the Japanese Finance Minister told reporters the BoJ acted on its own in the market, although officials were in contact with other nations, although he did not say what those nations were.

'Why the NZ$ fell against the US$'

BNZ currency strategist Kymberly Martin said the Japanese intervention represented a frustration held by central banks globally about the extent of US dollar weakness.

“A number of currencies that have showed significant strength relative to the US dollar, not based on what’s happening fundamentally, but just due to broad weakness in the US dollar,” Martin said.

“The Swiss National Bank came out last night and did their part of trying to intervene to bring down their currency, you had other countries making comments, and now you’ve got the Bank of Japan actually coming out and doing something,” she said.

“So while the Reserve Babk of New Zealand has not done anything, and I don’t suspect they will, it just reminds currency markets that it’s possible it’s not a one-way bet. That’s why I think you’ve seen the New Zealand dollar fall, not as much as the yen, but in the same direction.”

While it could not be said the New Zealand dollar was not going to revisit the highs seen over the last few weeks, Martin said the BoJ action started to put out more the idea that it was a two-way market in terms of where the currency could head.

“When you look at the currency, where it’s come from March until now, it’s pretty much been a one-way bet,” she said.

For the New Zealand dollar to start on a more significant downtrend markets would have to see the US economy turn around further.

“But I think it does start to draw a line under the speed of appreciation that we’ve been seeing,” Martin said.

(Updated with BNZ comment, Bloomberg link, links, details)