RBNZ mum on talk of NZ$ intervention

Sharp NZ dollar drop sparks speculation of Reserve Bank intervention

Currencies

Sharp NZ dollar drop sparks speculation of Reserve Bank intervention

25th Aug 14, 11:51am by Gareth Vaughan

The Reserve Bank is declining to comment on speculation it intervened in the currency markets this morning after a sharp fall in the New Zealand dollar.

In a note on the drop currency trader HiFX said there were unconfirmed rumours the Reserve Bank had intervened by selling substantial amounts of the New Zealand dollar in thin Monday morning trade.

"We believe this sudden drop in NZ dollar has the hallmarks of RBNZ intervening. They select times such as Monday morning when liquidity is thin to get maximum ‘bang for their buck’, and when they consider the NZ dollar strength to be ‘unjustified'," HiFX said.

"At this stage, there has been no official word of intervention, and the possibility remains that there is another cause behind the NZ dollar move."

The NZ dollar dropped about half a US cent from US84c. It was last at US83.55c, and A89.86c.

In response to this a Reserve Bank spokesman would only say; "We have no comment."

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Source: RBNZ

Source: CoinDesk

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5 Comments

by Stephen Hulme | 25th Aug 14, 12:20pm 1408926058

We believe this sudden drop in NZ dollar has the hallmarks of RBNZ intervening. They select times such as Monday morning when liquidity is thin to get maximum ‘bang for their buck’, and when they consider the NZ dollar strength to be ‘unjustified'," HiFX said.

Hmmmm - NZD/USD had already fallen from 0.8800 to 0.8400 - did the former level not give enough cause to act compared to the later?

Will the public servants running the RBNZ on taxpayers behalf and at their cost extend their responsibility to us by informing us of plans to sterilise such rumoured money printing exercises?

Furthermore, this smells remarkably like a spin doctored publicity stunt which favours the incumbent government.

by cowboy | 25th Aug 14, 1:44pm 1408931064

Monitor both the NZD:USD and the EUR:USD. both are moving in synchronisation this morning so that means a very high probability that it is rising movement in the USD causing the drop.

If it was NZD:USD and not EUR:USD (and the AUS moved) then it would likely be NZD intervention.

by Grant A | 25th Aug 14, 7:30pm 1408951826

There is always much speculation on the parties involved or drivers behind a big move in currencies. Certainly RBNZ intervention was rumoured as one possible reason this morning but interesting Bloomberg before lunch reported that traders in Asian cited a concern by one or two offshore players at the possibility that Internet Mana may carry some sway in a new Govt following the election. Whether true or not such events are not common ahead of NZ elections where the choices are between one or other of either a centre left or centre right party - this election has the offshore markets taking much more notice, for good or bad.

by Grant A | 25th Aug 14, 8:18pm 1408954703

True Ostrich, and that's the value of the greater market liquidity we have these days that many don't appreciate about having a highly traded currency relative to our size (they think it just means higher), but we are certainly still vunerable on the weekly open. Still, we don't see as many moves like that these days but I wouldn't try to read too much into it because no one can ever be sure of the driver - but I did find the Bloomberg news item interesting in that it was an offshore perception of what may be a growing focus offshore.

by David Chaston | 25th Aug 14, 8:38pm 1408955880

Not really. Every day there are NZ stories on Bloomberg. They have at least one reporter in NZ, maybe more.

http://www.bloomberg.com/news/australia-newzealand/