September 29th, 2014 Guest post by Jay Hawk at Orbex.
The Kiwi is sharply lower against the U.S. Dollar this morning, making a 13 month low at 0.7706 today after news broke of RBNZ forex market intervention in August aimed at depreciating the New Zealand Dollar. The central bank reported that it sold a substantial total of $521 million worth of its New Zealand Dollar holdings in the month of August, compared to much lower Kiwi sales of only $2 million worth in July.
Prime Minister John Key, who is a former currency trader, stated after the news broke that, “I happen to actually support the view that the Governor has that the exchange rate is overvalued, so if they have intervened, it would be a matter for them, but it would seem fairly logical”.
He added that, “I think at the level we’re at, 78 odd cents (USD), we’re still at very high levels”. Asked what level would be appropriate for the Kiwi, Key told reporters that, “In the end, the Goldilocks rate, not too high, not too low, just about right, I don’t know, [US]65 cents maybe, certainly … lower than it is today”. He continued by saying that, “Just because I think that’s the rate that works for exporters doesn’t mean it’s the rate it’s going to get to.”