NZD/USD Falls As Reserve Bank Governor Signals Possible Intervention

NZD/USD fell around 200 pips as the Reserve Bank Governor signaled possible intervention. “Unjustified and unsustainable are important considerations in assessing whether exchange-rate intervention is feasible,” Wheeler said in an unscheduled statement. “Another consideration is whether conditions in the foreign exchange markets are conducive to intervention having an impact on the exchange rate.”

RBNZ Governor wants NZD/USD to fall more to bring it in line with the economic fundamentals. Strong NZD is hurting the Kiwi economy. The RBNZ’s justification for this is that even when one accounts for the outperformance of the NZ economy compared to other advanced nations, the level of the exchange rate is unjustified. This steams for the stubbornness of the kiwi in the face of falling commodity prices. In other words, the bank thinks the recent falls in NZD aren’t steep enough considering recent plummeting key commodity values, like dairy and wood prices.

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