Comment on RBNZ currency intervention
The bank is exercising its powers in accordance with the legislation and the policy targets agreement.
---------------------------------
Finance Minister Michael Cullen said the Reserve Bank today exercised powers the government gave it in 2004 to reduce excess volatility in the dollar.
"The bank is exercising its powers in accordance with the legislation and the policy targets agreement," said Dr Cullen.
"Dr Bollard has been saying for some time that he sees the exchange rate as exceptionally high and unjustified on the basis of New Zealand's medium term fundamentals.
"The Bank clearly felt the current situation met all the criteria for intervention that it has previously publicly discussed, namely:
the exchange rate must be exceptionally high or low;
the exchange rate must be unjustified by economic fundamentals;
intervention must be consistent with the policy targets agreement; and
conditions in markets must be opportune and allow intervention a reasonable chance of success.
"Today's action is a reminder to people if they over invest in the New Zealand dollar they could suffer losses," Dr Cullen concluded.
---------------------------------
Finance Minister Michael Cullen said the Reserve Bank today exercised powers the government gave it in 2004 to reduce excess volatility in the dollar.
"The bank is exercising its powers in accordance with the legislation and the policy targets agreement," said Dr Cullen.
"Dr Bollard has been saying for some time that he sees the exchange rate as exceptionally high and unjustified on the basis of New Zealand's medium term fundamentals.
"The Bank clearly felt the current situation met all the criteria for intervention that it has previously publicly discussed, namely:
the exchange rate must be exceptionally high or low;
the exchange rate must be unjustified by economic fundamentals;
intervention must be consistent with the policy targets agreement; and
conditions in markets must be opportune and allow intervention a reasonable chance of success.
"Today's action is a reminder to people if they over invest in the New Zealand dollar they could suffer losses," Dr Cullen concluded.