Central bank says New Zealand interest hikes set to continue
June 13, 2014 7:55 am
Even with the New Zealand dollar already the strongest performing currency among those used by developed economies, the Reserve Bank of New Zealand has no intention to stop raising interest rates anytime soon.
The kiwi in recent weeks has risen against several of its major counterparts including the US dollar which it has gained 1.6% in value to climb to $0.8687. In the past week alone, it has gone up 2% against the British pound and 3% and 1.3% when compared to the euro and the Australian dollar, respectively.
This high performance of the New Zealand dollar does not come as good news to all, however, as an appreciating currency can hamper trading conditions in an economy which is what some economists are already claiming to be present in New Zealand. So far, the pacific country’s economy has begun to dial back its pace following a major rally in growth possibly indicating the unsustainability of the rates which was initially thought to be a reason for the central bank to ease up on further increases.
The Reserve Bank acknowledged these claims and added the concern of how farm incomes would be hurt by rising commodity prices as New Zealand battles high inflation, an unusual predicament for developed countries. This has made the currency a major attraction for those entering the carry trade.
Even so, the central bank countered by pointing towards the construction surge well underway in Christchurch as well as the increased demand driven by a robust net immigration due to the mining industry’s decline in neighboring Australia paired with their ongoing reconstruction activity brought on by a devastating earthquake in 2011. Deputy Governor Grant Spencer, however, conceded that a weaker exchange rate would be preferable to policy makers.
The material has been provided by InstaForex Company – www.instaforex.com
Even with the New Zealand dollar already the strongest performing currency among those used by developed economies, the Reserve Bank of New Zealand has no intention to stop raising interest rates anytime soon.
The kiwi in recent weeks has risen against several of its major counterparts including the US dollar which it has gained 1.6% in value to climb to $0.8687. In the past week alone, it has gone up 2% against the British pound and 3% and 1.3% when compared to the euro and the Australian dollar, respectively.
This high performance of the New Zealand dollar does not come as good news to all, however, as an appreciating currency can hamper trading conditions in an economy which is what some economists are already claiming to be present in New Zealand. So far, the pacific country’s economy has begun to dial back its pace following a major rally in growth possibly indicating the unsustainability of the rates which was initially thought to be a reason for the central bank to ease up on further increases.
The Reserve Bank acknowledged these claims and added the concern of how farm incomes would be hurt by rising commodity prices as New Zealand battles high inflation, an unusual predicament for developed countries. This has made the currency a major attraction for those entering the carry trade.
Even so, the central bank countered by pointing towards the construction surge well underway in Christchurch as well as the increased demand driven by a robust net immigration due to the mining industry’s decline in neighboring Australia paired with their ongoing reconstruction activity brought on by a devastating earthquake in 2011. Deputy Governor Grant Spencer, however, conceded that a weaker exchange rate would be preferable to policy makers.
The material has been provided by InstaForex Company – www.instaforex.com
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