John Key
The New Zealand dollar is in uncharted territory against
the US dollar and the unprecedented exchange rate is a concern,
Prime Minister John Key says.
The dollar broke through to a new post-float high today in
the wake of much better than expected trade data.
It traded at US82.16c late morning, the highest level since
it was set free in March 1985. The previous post-float high
was US82.15c.
"The reason, in my view, that the New Zealand dollar is
trading at such high levels against the US is because of the
inherent weakness in the US," Mr Key said at his post-cabinet
press conference today.
"It's because of the size of the deficit in the United States
of America and the enormous amount of debt that economy is
producing, and the fact that that debt is being funded
through quantitative easing - in the short term, that is
proving to be very challenging."
Asked how high he thought the dollar could go, Mr Key
replied: "I don't know... we're in uncharted territory so
that's of some concern."
Mr Key said it was a good news, bad news story for many
exporters.
"There's an imported component of what they export so that
price reduces," he said. "For New Zealand consumers it takes
the pressure off oil prices and imported goods, and for
commodity-based exporters life is a bit more bearable because
of high commodity prices.
"But we all acknowledge that for the manufacturers in a
non-commodity linked area, selling into a US dollar-based
market, these are levels that are not sustainable."
Mr Key said the Reserve Bank had the independence to
intervene but he had not had any discussions with it.
"It wouldn't be appropriate for me to give them guidance."
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