Feb. 21 (BusinessDesk) – The New Zealand dollar extended its slide from yesterday when Reserve Bank governor Graeme Wheeler outlined possible responses to a high kiwi and traders latched onto his use of the word intervention. The kiwi didn’t move much after the release of Federal Reserve minutes.
The New Zealand dollar fell to 83.53 US cents from 84.08 cents at 5pm in Wellington yesterday. It was at 84.58 cents before Wheeler’s speech notes were released. The trade-weighted index was at 76.27 from 76.33.
RBNZ’s Wheeler told the New Zealand Manufacturers’ and Exporters’ Association the kiwi dollar is significantly over-valued, and he “will intervene when the circumstances are right.” That was enough to spark a sell-off in the currency as the word intervention got flashed across trader screens. Minutes of the Federal Open Market Committee’s last meeting showed members favoured varying the fed’s monthly bond purchases.
“Everyone latched onto certain parts of (Wheeler’s) speech regarding intervention,” said Dan Bell, currency strategist at HiFX. “I think the market has over-reacted. He outlines a number of measures that could be used but this was more of an academic position than a policy position.”
The kiwi may trade in a range of 83.20 US cents to 84 cents today.
Bell said while the minutes of the Fed meeting showed there were differences of opinion between voting members, “I don’t think that was news to many people. At the moment policy response continues to sit within the more dovish camp,” he said.
The kiwi rose to 54.80 British pence from 54.43 pence and rose to 62.82 euro cents from 62.67 cents.
The local currency rose to 81.32 Australian cents from 81.14 cents and fell to 78.34 yen from 78.54 yen.