By Paul McBeth
This week we got one of those rare glimpses into the thinking of the Reserve Bank, when it published figures showing it had sold a tidy sum of kiwi dollars in December.
By tidy, I mean the bank ended up making a net sale of $199 million in kiwi dollars that month across a number of currencies.
While that should seem like a lot to you and me, let's keep it in perspective - some $32 billion of New Zealand dollars is traded every day. Our central bank dabbling with a couple of hundred million sounds a little less impressive, doesn't it.
However, it gives us an indication of what the bank really thinks about the kiwi dollar and where the currency is heading.
Governor Graeme Wheeler, who took up the reins in September, and his predecessor Alan Bollard have been crying foul over the strength of the kiwi dollar for quite some time.
That's all they can really do, because as Trade Minister Tim Groser said a few years back, there's not a heck of a lot New Zealand can do with its "pea-shooter" resources when the currency markets of the world are running in one direction.
Because of that, you tend to end up seeing a lot of 'jawboning', as public officers try to talk investors around to their way of thinking without actually tweaking any real economy levers.
Sound like a lot of hot air? It should, but it makes the Reserve Bank's actual sales of real money in the foreign exchange markets much more interesting.
What that $199 million position and the $64 million of net sales in November tell us is that the bank really does see the currency turning around at some stage and it's willing to take a punt to make some cash.
At those levels, it's certainly not trying to intervene, nor is it looking at a cheeky way of balancing Bill English's books. But if the opportunity is there to make a quick buck and close out the cost of holding certain positions in the country's central bank foreign currency holdings, its FX team will definitely take it.
And if markets want to take that as a clear sign the Reserve Bank think they're mugs for bidding our currency this high, that's helpful too for a central bank under considerable political pressure over its unwillingness to move off inflation targeting as its primary goal.
BNZ currency strategist Mike Jones reckons it's essentially the bank sending a signal that it really thinks the kiwi's overvalued, and it's willing to put a bit of money on the line.
And if it can make some profit and cover the cost of running its pretty sizeable currency programme, all the better. That money tends to go straight to government coffers as special dividends. Such sums could be handy for Finance Minister Bill English's knife-edge struggle to get back to surplus by 2015/16.
To be fair to the Reserve Bank's currency trading team, they're pretty good at what they do. The last time they made net purchases of kiwi dollars was some $525 million in March 2011, just after the Canterbury earthquake.
The currency plunged at the time of the disaster and the bank probably saw the opportunity not only to make a cheap buy, but to support the currency at a time of national crisis. On top of that, it achieved an 11 percent gain on the quarter of a billion dollars it sold from the purchases a year earlier.
Similarly, the last time the bank was selling kiwi dollars was in 2008 as the global financial crisis gathered pace. Not long after that the bank changed its dividend policy to pay out realised gains.
So what am I getting at?
Well the Reserve Bank is one of the few public departments that doesn't have too many problems attracting talent. So when it starts singling out an asset as ripe for a turnaround, it probably pays to at least pay attention.
And when it sees an opportunity to realise a return, it's going to take it. It may be able to sit on a bet for a very long time, but it is operating under an administration that doesn't have dollops of cash to dole out.
What makes it even more interesting, is that most bank economists and analysts aren't really backing the same horse.
Rather, they point to New Zealand's relatively benign economy and prospect of rising interest rates as a couple of fundamental reasons why investors are backing the kiwi. And if the currency can beat its multi-month high of 84.75 US cents then there's no telling how far it can go.
No-one really likes making serious predictions on the kiwi as it's a bugger of a thing to pick, so who should you believe?
I don't know. I'm a mere hack looking over the fence. But my instinct is not to bet against the Reserve Bank - they tend to have much deeper pockets than anyone in our fishpond.
There's just one fly in the ointment in these subtle attempts to lower the dollar.
Every time Wheeler has opened his mouth since taking over the top job, the kiwi dollar rises. And if that happens when he's calling it overvalued, imagine where it would go if he tried talking it up.
The Reserve Bank has lifted the official cash rate for the second time in as many months.