New Zealand dollar dropped as much as 1 per cent on Thursday following comments from central bank officials that indicated preference for a lower exchange rate against its US counterpart.
The New Zealand dollar fell as low as $0.7265 in afternoon trading in Asia, touching that level after assistant governor of the Reserve Bank of New Zealand John McDermott said in an interview with Bloomberg that the currency “does need to adjust down”.
He also noted that changes in the language of the RBNZ’s latest monetary policy statement were designed to convey the bank’s unease with the currency’s strength and could be taken to signify a first step toward potential intervention.
The Kiwi dollar initially held firm following the RBNZ’s decision to hold interest rates steady at 1.75 per cent on Thursday morning, but softened by around 0.4 per cent after testimony from governor Graeme Wheeler to a parliamentary committee in which he said the option of foreign exchange intervention was “always open” to the bank.
Analysts at Crédit Agricole noted following Mr McDermott’s comments that “with half the criteria for intervention being met, the RBNZ appears ready to intervene if the NZD continues to rally and gets into what is would consider overvalued territory and when market positioning in the currency becomes excessive.”