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June 29, 2007 10:13am by David Farrar

Dollars hits US$0.77

Wow hasn’t that Reserve Bank intervention worked well.

The TWI also hit a post float high of 74.86

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tim barclay

It only worked because the Bank caught the market completely by surprise. But it will not work this time. As soon as the market smells the bank is getting involved they will test the bank. Cullen could bet the entire Cullen fund and much else and he will not succeed. Of course to sell USD in favour of the Kiwi is inflationary unless the move is sterilised in some way. Bollard is useless and should ignore Cullen if he is to have any integrity. Bring back Brash
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June 30, 2007 7:48am
dad4justice

Correct Tim , Don Brash warned the delirious delinquents in government years ago about the dangers of high dollar, but the fools did not listen . I am afraid now the hedge pigs will devour the currency with ease and the thick bastards should have listened to Mr Brash . I think all is lost now , thank you Labour – great stuff – all that money up in smoke !!!
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June 30, 2007 8:15am
Kent Parker

Irrespective of how the dollar got so high, isn’t a high dollar a sign of a strong economy, and also, since its against the USD, also a sign of a weakening USD? When the Euro becomes the major trading currency NZD comparisons might look quite different. We are still using old standards which are almost redundant.
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June 30, 2007 8:46am
Adolf Fiinkensein

We hit 77.5 some little while ago, by the look of the graph. Currently 77.19.

No Kent, the soaring high dollar is not a sign of a strong economy, it’s a sign of deleriously high interest rates.
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June 30, 2007 9:46am
Kent Parker

it’s a sign of deleriously high interest rates.

Yes, the high dollar is caused by a number of things, including, I believe, Japanese investors making a quick buck out of the exchange rate. It may be painful growing a high dollar, but it forces us to become more competitive, to get into new products, new markets, and once we are used to the new status quo, then we get the benefits. That won’t happen until after the current trend stops or slows down.

It’s the change that is painful in the short term.
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June 30, 2007 10:17am
dad4justice

” I believe, Japanese investors making a quick buck out of the exchange rate.”

The japs were warned about interests rates in the land of milk and honey ,however other bigger buyers are extremely keen to buy up , dollar for dollar by Christmas ? Just a silly nightmare thought !
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June 30, 2007 10:56am
Sick of Commies

You’re an idiot Kent.

It doesn’t “force us to be competitive”, it sends exporters down the toilet and out sources work to the slave labour paradise of China.

the onlu “competition” you socialists are into to how to spin the fact that you’ve fucked a once proud nation.

Christ its no wonder Australia is doing so well, they have all out best and brightest with more joining them daily.
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June 30, 2007 11:03am
Kent Parker

its no wonder Australia is doing so well, they have all out best and brightest with more joining them daily.

Umm.. Oz has uranium, aluminium and precious metals. Haven’t you seen the Pineapple Lumps ad on TV? Since we don’t have any natural mineral wealth, like the Ozzies, the Iranians or the Saudis we have to work that little bit harder, but our day will come.

The “once proud nation” was a Brit dependent food basket colony, and right wing National govts have been just as much part of the journey out of it as left wing ones.

Redundant exporters go down the toilet and are replaced by newer ones like Weta Studios and Animation Research Ltd. Happens all the time. Pays not to listen too much when the old ones squeak as they are eliminated.
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June 30, 2007 11:25am
bob

Biggest joke is the fact that it’s meant to be “Export Year 07”. Bit like “Jew Year 1944”

Kent – shut the fuck up – you know not what you talketh about.
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June 30, 2007 1:51pm
dad4justice

Export a business to China – well done Labour !
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June 30, 2007 2:35pm
kiwi trader

Kent is exactly right.
I have been trading currencies for over 30 years and he is talking sense.
A higher currency is a sign of a strong economy.
Sitting in New York you have certain investmnet criteria.
Must be a democracy.
Must be AAA rated.
Must have Sovereign fiscal surpluses.
Must have no exchange control.
Must have free and open borders.
Must have an independent legal system.

This already eliminates many economies to invest in. Australia and New Zealand come up well and New Zealand AND Australia have very high interest rates.

Perhaps also the commodity boom and being a safe place well away from the trouble spots also attracts other capital.

Strong exporters who sell on value, not price don’t care about the currency… and they hedge anyway.
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June 30, 2007 3:00pm
tim barclay

I made an error in my post: the bank is selling kiwi to try and drive the price down against the collective views of international finance. As I said, Governments that attempt to buck the market will lose and have lost. Cullen does not understand this as he thinks he is smarter than everyone else. He is an arrogant fool who will cost the tax payers plenty with this little game of poker he is playing. I think Bollard understands this but I fear Cullen does not.
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June 30, 2007 3:48pm
Kiwi Trader

And Dad4justice no money “has gone up in smoke”
The Reserve Bank has merely converted some of their reserves into USDs. At the highest rate since the float too, so in the long run it will be a good trade. Don’t forget, the Reserve Bank of Australia has been doing this for years. The RBNZ is only doing what the RBA has done, and made good money doing too, over the last few years.
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June 30, 2007 3:51pm
baxter

So balance of payments and current account deficits are indicative of a strong economy. Those nations like Japan and China which artificially restrict the value of their currencies and run massive surpluses are weak economies. Thanks for the lesson Kiwi Trader.
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June 30, 2007 3:51pm
David Farrar

Kiwi Trader is right that the RBNZ is unlikely to lose money so long as they can hold on long enough until the dollar goes below 75c.

But the real damage may be that they are looking more and mroe ineffectual.
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June 30, 2007 4:04pm
Adolf Fiinkensein

Kent, where did you get the idea we have no natural mineral wealth? What the hell do you think iron sands and coal just happen to be. Our ‘natural wealth’ happens to be our clomatic ability to grow good quality green grass all year round with little artificial input. Australia does not have this same benefit. Your precious ‘high dollar’ has cost this country some billions of dollars in export income EVERY year for the last three at least and is continuing to do so.

You are simply spouting lame and cliched leftist excuses. Wouldn’t you be more at home over on Jordan Carter’s or Russell Brown’s blog?
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June 30, 2007 4:11pm
Kiwi Trader

Baxter
BOP and CA are concerns certainly. But they are not seen as an issue as the capital flows are all private, there are no government content as the fiscal position is in surplus.
This is why the markets ahae no concern with the extent of the NZ CA. Refer Standard and Poors and Moodys investment ratings recent comments.
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June 30, 2007 4:18pm
GNZ

If a country goes into the money markets it needs to be doing it with a long term view – trying to fight the market on a day to day basis is stupid because you have converted your major advantage (you’re aility to wait years before ralising your profits) into a disadvantage (the political need to win on a day to day basis).
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June 30, 2007 4:19pm
weizguy

“You are simply spouting lame and cliched leftist excuses. Wouldn’t you be more at home over on Jordan Carter’s or Russell Brown’s blog?”

So there’s now no dissent allowed on Kiwiblog? Begone from this echo-chamber forwith!
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June 30, 2007 4:41pm
Kiwi Trader

DPF It really depends on what you think the RBNZ is trying to achieve. They are only trying to “top off” the currency moves and “smooth” market moves. They are not trying to change the trend, or defend a particular level. From an economic perspective it is a waste of time as it will not work until the various forces at play producing a strong NZD move on. But from a political perspective it has merit in that it can be argued that they are trying to assist the export sector, however futile. All the arguements made against intervention made at the time the powers were granted to the RBNZ still remain valid today. But I still think they will make serious money eventually.
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June 30, 2007 5:38pm
dad4justice

What , poor despondent weizguy , begone you from this echo -chamber . What a half -wit .
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June 30, 2007 5:39pm
Kent Parker

Adolf,

Most every country has coal, and if they haven’t they have oil. There is billions of tons of the stuff in the earth’s crust, but we don’t use it because it is a pollutant -refer to dark satanic mills of 19th century Europe.

While we do have some natural mineral wealth we have nothing to use for sizeable export income. You can bellyache as much as you like that the difference between relative prosperity in OZ vs NZ is due to politics but the reality is that it is due to differences in mineral resources. Our green pastures do not constitute ‘mineral’ wealth, grass, being as you know, ‘organic’ and it requires a lot more work to obtain a return from. Farming is not going to be a big part of our future if we are to remain/become a wealthy country, when competing against closed EU and US markets, and cheap labour in Chile and China.

Basically, the NZdollar is not going to go down vs the USD in any short while, so we may as well get used to it.

I wonder if the outcry over the USD exchange rate is mostly irrelevant given that our economy continues to prosper and that it is time we switched to using the Euro instead for a more realistic comparison of our strength.
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July 1, 2007 7:00pm
Kent Parker

Adolf,

Most every country has coal, and if they haven’t they have oil. There is billions of tons of the stuff in the earth’s crust, but we don’t use it because it is a pollutant -refer to dark satanic mills of 19th century Europe.

While we do have some natural mineral wealth we have nothing to use for sizeable export income. You can bellyache as much as you like that the difference between relative prosperity in OZ vs NZ is due to politics but the reality is that it is due to differences in mineral resources. Our green pastures do not constitute ‘mineral’ wealth, grass, being as you know, ‘organic’ and it requires a lot more work to obtain a return from. Farming is not going to be a big part of our future if we are to remain/become a wealthy country, when competing against closed EU and US markets, and cheap labour in Chile and China.

Basically, the NZdollar is not going to go down vs the USD in any short while, so we may as well get used to it.

I wonder if the outcry over the USD exchange rate is mostly irrelevant given that our economy continues to prosper and that it is time we switched to using the Euro instead for a more realistic comparison of our strength.
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July 1, 2007 7:16pm
Kent Parker

Adolf,

Most every country has coal, and if they haven’t they have oil. There is billions of tons of the stuff in the earth’s crust, but we don’t use it because it is a pollutant -refer to dark satanic mills of 19th century Europe.

While we do have some natural mineral wealth we have nothing to use for sizeable export income. You can bellyache as much as you like that the difference between relative prosperity in OZ vs NZ is due to politics but the reality is that it is due to differences in mineral resources. Our green pastures do not constitute ‘mineral’ wealth, grass, being as you know, ‘organic’ and it requires a lot more work to obtain a return from. Farming is not going to be a big part of our future if we are to remain/become a wealthy country, when competing against closed EU and US markets, and cheap labour in Chile and China.

Basically, the NZdollar is not going to go down vs the USD in any short while, so we may as well get used to it.

I wonder if the outcry over the USD exchange rate is mostly irrelevant given that our economy continues to prosper and that it is time we switched to using the Euro instead for a more realistic comparison of our strength.
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July 1, 2007 7:16pm
Kent Parker

A couple of links:

From this site:
http://img.scoop.co.nz

Despite the cautious mood surrounding profitability expectations right now, the sixth annual DHL Export Barometer finds 63% of
exporters anticipate an increase in their export orders in the next 12 months.
Furthermore, many exporters across all sectors have found ways and means of getting cost out of their goods and services to find those elusive productivity gains. For some, this has meant upping their R&D programmes, and investing in technology, plant and equipment. This investment is taking place both in New Zealand and offshore, and is part of a greater commitment to get closer to our foreign markets and our customers.

And from this one:
http://www.careers.govt.nz

New Zealand produces a diverse range of industrial minerals. Production in New Zealand is valued at more than $325 million per year, with iron sand production worth an additional $30 million per year.

which is about 1.5% of export earnings

Oh and also from:
http://www.treasury.govt.nz

The recent strong domestic demand, increased non-tradable inflation and high dairy prices helped the NZ dollar to rise to a post-float high against the US dollar of 74.9 US cents on 18 April 2007 as financial markets anticipated another Official Cash Rate rise. The NZ dollar has since eased against the USD.

The NZ dollar is stronger against the US dollar than against other currencies, with the exception of the Yen, and so the Trade Weighted Index (TWI) has not increased as much as the NZ/US dollar exchange rate (Fig. 8). The reason for this is that the US dollar has weakened recently against all currencies.
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July 1, 2007 7:39pm

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