RBNZ currency sale 'trivial'
The Reserve Bank sold almost $200 million worth of kiwi dollars in December, but traders say it was probably an opportunistic sale rather than a feeble attempt to influence the high exchange rate.
Statistics released yesterday show the central bank has sold roughly a quarter of a billion dollars of its local currency holdings over the last three months.
Westpac market strategist Imre Speizer said the sale represented the management of foreign exchange reserves.
"Some may characterise it as a passive form of intervention. If so, it would be indeed extremely passive", he said.
"The amount's trivial compared to what gets traded."
The Reserve Bank is not allowed to actively intervene in the currency unless it reaches 'extreme' levels, and the timing has to be opportune.
"It would not be opportune to intervene in the kiwi here, because much of it's caused by US dollar weakness and global central bank money printing," he said .
The Reserve Bank could not change either of those.
Speizer said while some might see the sale as a signal of sorts, it was probably more of an opportunistic bid to massage the central bank's balance sheets.
Historical data shows the Reserve Bank periodically makes major purchases or sales of currency.
In former Reserve Bank governor Allan Bollard's book Crisis, he talks of buying foreign currency during the period from mid-2007 to mid-2008 when the dollar was strong, then selling some of it as the currency weakened through 2008-2009.
"We had intervened in the FX markets ... aiming to knock the top off the New Zealand dollar," he said.
The largest sell-off was almost $1.5 billion of kiwi dollars in July 2007.
Bollard also said that while a central bank could technically lose money, the Government "quite reasonably" expected to see a return on its capital.
- © Fairfax NZ News