Dollar edging up again
Page 1 of 2 9:55AM Tuesday June 12, 2007
By Brian Fallow
The dollar is edging up again, in the wake of the Reserve Bank's intervention yesterday which attempted to drive down the currency.
The New Zealand dollar was trading at around 76.20 US cents yesterday morning and dropped by around a 1.5 cents before starting to stage a recovery last night. After starting today just under 75 US cents, it is now trading at at 75.13.
Analysts are divided on whether the intervention it will work long term. Steve Barrow of investment bank Bear Stearns says New Zealand's interest rates are too attractive and the Reserve Bank will struggle to turn around the strength the dollar has shown in the past few years.
"Any central bank that tries to take on the currency market right now is going to find that it is struggling against a weak US dollar, and that's going to make it particularly hard."
Shock and awe
In a high-risk move, Reserve Bank Governor Alan Bollard has ambushed the money market by intervening to drive the New Zealand dollar lower.
If the aim was shock and awe, it succeeded. The dollar, which at 8am yesterday was trading at US76.19, dropped more than a cent. By 8.30 last night it recovered to US75.1c. Overall the bank's move pushed the currency down 2 per cent.
It is the first time the bank has intervened since the currency was floated in 1985.
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