NZ Dollar Falls Following Intervention of Central Banks

04 August 2011 - Which Way to Pay

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NZ Dollar Falls Following Intervention of Central Banks

Global currency trade markets were convulsed by central bank intervention effecting afternoon trade and resulting in the New Zealand dollar falling more than 1 USc to 85.3 USc today.

Following lunch, an intervention by the Bank of Japan pulled the yen lower stoking the resultant dramatic fall in the local currency vs the US dollar. This was subsequent to a surprise decision by the Swiss National Bank to drive the Swiss Franc down from its record highs against the US dollar. The Swiss National Bank slashed its cash rate to 0%in a determined move to protect its exportations by dragging its currency down.

Discussions in recent days have aroused suspicion that the US Federal Reserve will embark on a third round of Quantitative Easing or money printing (as being called QE III). Undertaking such a plan should have an immediate effect in reviving the stalling US economy. However, QE III would further devalue the US dollar in the global currency trade market.

A spokeswoman for the Reserve Bank of New Zealand said the bank did not comment on whether it had intervened in the foreign exchange market. Back in 2007 when the Trade Weighted Index gotover 77, the Reserve Bank did intervene. However, due to the ineffectiveness of that intervention as admitted by Prime Minister John Key as well as Reserve Bank Governor Alan Bollard, the Reserve Bank has since been seen to tread more carefully in volatile markets.



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