Reserve Bank steps in to force down NZ dollar
4:10PM Monday June 11, 2007
The Reserve Bank of New Zealand has taken the extraordinary step of intervening in the money market to bring down the value of the New Zealand dollar.
The central bank has confirmed it intervened in the foreign exchange market, saying it regarded current levels of the exchange rate as exceptional and unjustified.
The NZ dollar tumbled more than 1 per cent against the US dollar today as currency traders in Asia cited rumours in the market that the RBNZ was intervening to sell the kiwi.
A few traders in Tokyo and Hong Kong cited talk of intervention by the central bank in explaining the New Zealand dollar's drop.
The kiwi slid to US75.25c from near US76.20c before the rumours circulated. The kiwi had struck a peak of US76.40c on Friday, the highest since the RBNZ allowed the currency to trade freely in 1985.
The kiwi also fell more than 1 per cent against the yen to near 91.60 yen, down from a 17-year high near 93 yen struck on Friday.
First NZ Capital's Brett Steven says the move may be unprecedented.
He thinks it is the first time the Reserve Bank has intervened since the currency was floated 22 years ago. He expects to see the dollar drop further as the European markets open overnight.
Finance Minister Michael Cullen said: "Today's action is a reminder to people if they over invest in the New Zealand dollar they could suffer losses."
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Dollar tumbles after RBNZ intervenes