Article – BusinessDesk
Jan. 31 (BusinessDesk) The New Zealand dollar rose after Reserve Bank of New Zealand (RBNZ) held the official cash rate at 2.5 percent even though the central bank said the currency is overvalued.
Kiwi ignores RBNZ jawboning on ‘over-valued’ currency
Jan. 31 (BusinessDesk) – The New Zealand dollar rose after Reserve Bank of New Zealand (RBNZ) held the official cash rate at 2.5 percent even though the central bank said the currency is overvalued.
The kiwi rose 83.40 US cents from 83.11 cents just before the review and 83.71 cents at 5pm on Wednesday.
It had fallen overnight to 82.99 cents when global sentiment took a hit from news the US economy contracted in the fourth quarter for the first time since 2009, and the S&P 500 slipped from a five-year high.
In leaving the official cash rate unchanged at 2.5 percent RBNZ Governor Graeme Wheeler said global growth will recover in 2013 as will the local economy.
He said subdued inflation mainly reflected the impact of the overvalued New Zealand dollar.
“The high currency is directly supressing inflation on traded goods, and is undermining profitability in export and import competing industries.
“At the same time, the labour market remains weak and fiscal consolidation is dampening growth,” he said.
US gross domestic product fell at a 0.1 percent annual rate after expanding at a 3.1 percent clip in the third quarter. No economists polled by Reuters had predicted a contraction.
“The fall is attributable to cutbacks in government spending and weaker than expected restocking by businesses. Remarkably analysts were fairly upbeat about the figures,” Bancorp Treasury Services said.
The US Federal Open Market Committee, as expected, left in place its bond-buying stimulus plan, and kept interest rates low, in a statement released just ahead of the RBNZ rate review.
It regarded the pullback in the US economy as temporary and indicated it will keep purchasing securities until the outlook for employment improves.
The US payrolls report, due Saturday NZ time, is also a big event for the market but evidence ahead of it has been conflicting.
The Australian fourth-quarter terms of trade report today will also be watched.
The kiwi was at 80.13 Australian cents after 9am from 79.74 cents at 8am and 79.94 cents at 5pm on Wednesday.
It was at 75.70 yen at 8am from 76.04 yen at 5pm on Wednesday, at 61.29 euro cents from 62.05 cents and was at 52.63 British pence from 53.13.
The trade-weighted index was at 74.85 from 75.29.