NZD/USD –RBNZ Governor tanked currency alleging it to be overvalued

on Aug 20, 2013
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**iNVEZZ.com, Tuesday 20 August:**

The Reserve Bank of New Zealand’s survey of Inflation Expectation for Q3 was reported at 04.00 BST today. The release showed that inflation expectations bounced 30 basis points from the 14-year low of 2.1 percent to 2.4 percent.
Following the diminishing easing stance from the RBA’s minutes, Graeme Wheeler, governor of the Reserve Bank of New Zealand torpedoed the kiwi by alleging the currency to be ‘’overvalued’’. In his speech titled “Explaining the Role of Macro-Prudential Policy”, which was supposed to discuss why caution should be implemented with monetary policies, Wheeler jumped to the completely unrelated topic of the high price of the New Zealand dollar.

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On 7 May Governor Wheeler called the New Zealand dollar as significantly overvalued, which was followed by significant decreases of the kiwi to 2013 lows in the coming two months.

The governor of RBNZ also indicated that from 1 October the central bank will aim to decelerate growth in the housing market by capping low-deposit loans at 10 percent of all new mortgages approved. In the speech Wheeler outlined the central bank’s future strategy in an effort to reduce the bubble risks that have limited RBNZ’ rate-cutting, aimed at decreasing the value of the kiwi. Compared to the Australian central bank which has consistently lowered borrowing costs by 225 basis point from 2011 to 2.5 this August, the RBNZ has cut interest rates only once by 50 basis to 2.5 percent in March 2011. As a result the AUD/NZD has decreased by 19 percent from 1.38 in 2011 to as low as 1.12 and the kiwi at the end of July this year.
Consequently, the NZD/USD is down 1.25 percent so far today to 0.7967 and the AUD/NZD is up half percent intraday to 1.1348.

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Forex: NZD/USD at 53-day high Forex Afternoon update: Bundesbank comments raise the euro

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