Failure by the Reserve Bank to try to talk down the value of
the New Zealand dollar on Thursday has left markets more
comfortable with the prospect of a higher-value currency for
most of next year.
Governor Graeme Wheeler, in his first monetary policy
statement since being appointed to the job, indicated the
bank had revised up substantially its forecasts for the New
Zealand trade-weighted index - a basket of the currencies of
the country's main trading partners.
The recent further rise in commodity prices has probably left
the bank a bit more relaxed with the high dollar.
BNZ currency strategist Mike Jones said that after
consistently having a stronger currency view than the Reserve
Bank for the past year, his forecasts were now more or less
The tone of the monetary policy statement left him even more
comfortable with a higher dollar view.
''If the bank was ever going to shift to an easing bias, or
at least flag the possibility of rate cuts in the future, it
was then. The fact that they didn't betrays a clear
reluctance to cut rates.''
Clearly, the Reserve Bank had faith in its forecasts for a
pick-up in New Zealand growth and inflation next year, he
The BNZ had revised up its NZD-USD forecasts for the second
half of next year. Previously, the BNZ had expected the
currency to gradually head lower through that period.
''We now see less chance of this occurring and have lifted
our end-2013 forecast from US78c to US81c accordingly.
''It's not a story of additional marked strength in the
currency, more a stronger-for-longer view,'' Mr Jones said.
Any dips in the NZD-USD cross rate should continue to be
viewed as buying opportunities.