Reserve Bank intervenes in NZ dollar

The Reserve Bank has started selling NZ currency in a bad to drive the price down – a strategy which has initially worked with a 1c fall.

The Reserve Ban needs to be careful. If you’re hiking up interest rates on the one hand, then naturally more people will want to buy NZ dollars which will push the NZ dollar up. So to then start selling also can be a bit of a King Canute.

If they are doing it just to smooth out the exceptional spike over the weekend, probably will get away with it. If they remain in the market until the level is at where they think it should be, then the dangers are significant.