NZ PM joins the jawbone shoutdown of the Kiwi

By in Australian Dollar, New Zealand Economy

| 29 comments

See the latest Australian dollar analysis here:

Macro Afternoon

flyingkiwi

by Chris Becker

As distasteful as having an ex-financial speculator as your country’s leader, I’d still rather have former FX trader John Key than a Luddite as my Prime Minister. Because at least he knows how to smack down the currency in co-operation with its central bank, the RBNZ – from Bloomberg:

The kiwi dropped against all 31 major counterparts as Prime Minister John Key was reported as saying currency needs to be weaker.

Prime Minister Key said the so-called Goldilocks level for the nation’s currency is around 65 cents, Interest.co.nz reported, citing comments to reporters.

“We are interpreting this as intervention,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland, said of today’s currency sales data. The kiwi “is likely to remain under pressure while people digest this, but I don’t think that today’s data should really surprise the market. The RBNZ has been very clear about this.”

Of course the Kiwi sank like a flightless bird while the Aussie continues to fall in sympathy as the RBA characteristically sits on its hands. The RBNZ released formal details of its intervention in the market today as well:

New Zealand’s central bank said today that it sold a net NZ$521 million of the local currency in August, the most since July 2007.

By the way I found out today that RBNZ’s chief Graeme Wheeler is paid $600K NZD, or just over $500K AUD while Captain Glenn gets $1m AUD or nearly double.

Can I suggest a productivity improvement at no cost to the Australian taxpayer?

 

Latest posts by Chris Becker (see all)

Comments

  3. Gunnamatta

    What I thought was the most impressive thing about what Key did was clearly articulate what he thought was the NZD ‘sweet spot’ – according to Interest.co.nz (quoted by Bloomberg) of USD 0.65.

    He could do that as both a former (and well respected) Forex man as well as the prime Minister. But he is signalling to both the market and the average Kiwi about where he saw the currency as needing to be.

    Some guidance from our national leaders (both the politicos and the monetary policy types) on the same would be starting with a little policy transparency and a step forward on debate about monetary policy and the economy………..

  4. The Lorax

    Interestingly NZD absolutely smashed since mid July but NZ stock market doing fine. No correlation between the Kiwi and their stock market, unlike AUD and ASX.

  5. tanmedia

    John Key pulls no salary. It all goes to charity. He’s made his loot.

    Furthermore, looking at the falls against JPY, there is still serious work to be done.

  7. StomperMEMBER

    “By the way I found out today that RBNZ’s chief Graeme Wheeler is paid $600K NZD, or just over $500K AUD while Captain Glenn gets $1m AUD or nearly double”

    Graeme does twice the work – Glenn has half the work done by APRA

  8. Hugh PavletichMEMBER

    NEW ZEALAND LABOUR PARTY DECLINE 1938 – 2014 … KIWIBLOG … HOW DOES IT NEED TO CHANGE ?

    New Zealand Labour Party Decline 1938 – 2014 … Kiwiblog

    http://www.kiwiblog.co.nz/2014/09/labour_1938_-_2014.html

    The fall and fall of Labour (and little noticed topping out of The Greens) 2000 – 2014 … Kiwiblog

    http://www.kiwiblog.co.nz/wp-content/uploads/2014/09/colmarbrunton.png

    2014 GENERAL ELECTION – PRELIMINARY RESULT

    http://www.electionresults.govt.nz/electionresults_2014/

  9. Rod77

    Ok its great that he knows how to bring the Kiwi down. But surely this ex trader knows he is bringing on capital flight to his country which will have a impact on his economy.
    Just before the Taper Tantrum Brazil was all high and mighty about its currency, angry at the Fed for exporting their problems to emerging markets. Then they go what they wanted and ten year bonds got smashed.
    Key will do it to the NZ economy this time next year he will be willing to drop his pants for some foreign capital. But then maybe he knows full well that NZ banks are really our banks and it will be the RBA and APRA who need to worry about the Kiwi housing bubble being brought back to earth at the same time as soft commodity prices get munched.

    • Andy!

      I do admire him for acting in the now though. He may have to change tact, and will do so if/when required. GS is keeping IR low until there’s an emergency to warrant it, even if it takes a decade.

    • Hugh PavletichMEMBER

      Rod77 … check out the New Zealand Productivity Commissions work … the earlier housing affordability report … the recently released regulatory performance report … and just announced local government land supply research now underway …

      http://www.productivity.govt.nz/

      I trust this gives you a better idea how things are trending in New Zealand. Structural issues are being dealt with.

  10. God

    If anybody believes John Keys is responsible for the falling NZD you are barking f……. mad. Yeah, if only Tony Abbott would say something like that I’m sure
    the AUD would fall. It was already falling ffs.

  11. Jason

    By the way I found out today that RBNZ’s chief Graeme Wheeler is paid $600K NZD, or just over $500K AUD while Captain Glenn gets $1m AUD or nearly double.

    Maybe we should just pay Cap’n Glenn in USD instead?

  12. Hugh PavletichMEMBER

    NEW ZEALAND ESSENTIAL RESOURCE MANAGEMENT ACT REFORM: GETTING THE SNOUTS OUT OF THE TROUGH …

    Editorial: (Resource Management Act) Reform should have twin goals … The Press

    http://www.stuff.co.nz/the-press/opinion/editorials/10558733/Editorial-Reform-should-have-twin-goals

    Interestingly, the failure of the intended enabling and simplified RMA goes right back to its implementation in 1991, under Nationals then Environment Minister Simon Upton.

    Simon Upton, with just an academic background and not at all grounded and “street smart”, failed to get control of the bureaucracies at central and local level (who had no intention of relinquishing the failed Town & Country Planning Act power and control), allowing vested interests to milk it for all its worth.

    With this weak governance and leadership from the top, not surprisingly, the associated professionals were more than happy to turn it in to a fee-farming exercise.

    Not once, for example, has a professional group (other than the economics profession) made ANY constructive contribution to solve the serious housing crisis. Not once in near a quarter century.

    The legal fraternity has been grossly unprofessional through this whole sorry saga, in their infantile greed, blissfully ignorant of elementary economics and of the wider public interest. In comparison used – car salespeople are paragons of virtue, with much higher ethical standards.

    The professionals associated with the RMA would be well advised to take a good hard look at themselves and grow up.