New Zealand dollar declines on RBNZ intervention

New Zealand’s dollar fell to a five-week low vs. its U.S. counterpart after Reserve Bank Governor Graeme Wheeler said the central bank has sold the currency and may do so again to boost exports.

The so-called kiwi has surged 45% against the greenback since the end of 2008, the biggest advance along with its Australian peer, among more than 150 currencies tracked by Bloomberg. Poland’s zloty dropped as much as 0.3% versus the euro after the central bank cut its benchmark interest rate to a record low. The euro rose for a second day versus the dollar after German industrial production data unexpectedly rose.

“Central banks who haven’t had a need to cut rates are seeing that their currencies have appreciated and they are having to lean against this strengthening pressure,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “New Zealand is where we’ve had the most aggressive comments and action. It is causing some long kiwi positions to be taken out.” A long position is a bet an asset will rise.

The New Zealand dollar dropped 0.7% to 83.99 U.S. cents at 9:07 a.m. New York time after touching 83.60, the lowest since April 1. The yen rallied 0.3% to 98.67 per dollar. The euro gained 0.6% to $1.3162 and advanced 0.3% to 129.87 yen.

Zloty, Krone

Poland’s central bank cut its benchmark interest rate by a quarter point to a record low 3% as the European Union’s largest eastern economy struggles with slowing growth. The zloty fell as much as 0.3% versus the euro before trading little changed at 4.1374.

Norway’s central Bank kept its benchmark interest rates unchanged at 1.5% for a seventh meeting after fighting krone strength with verbal warnings to mitigate the exchange rate’s effect on inflation and exports. The currency rallied 1.4% against the dollar to 5.7652 to make it the biggest gainer among the greenback’s 16 most-traded peers.

Wheeler told the New Zealand parliament’s finance and expenditure select committee in Wellington today that he reserves the right for further currency sales to damp gains in the kiwi. The RBNZ publishes monthly figures for its net currency sales that may or may not involve direct intervention, which show it sold NZ$2 million in March, and NZ$199 million in December. It had an intervention capacity of NZ$8.7 billion at March 31, the data shows.

Lower Kiwi

“Wheeler is clearly indicating he wants to see a lower New Zealand dollar, because of what the currency’s strength is doing to the long-term health of the economy, especially to manufacturing,” said Greg Gibbs, a Singapore-based senior currency strategist at Royal Bank of Scotland Group Plc. “They don’t want the credit-fueled recovery being forced on them by unprecedented monetary easing from global central banks.”

In China, imports rose 16.8% in April from the prior month, the customs administration said today in Beijing. That was more than the 13% increase expected by economists in a Bloomberg survey. Exports grew 14.7% last month from March. China is the biggest trading partner for both Australia and New Zealand.

“A lot of the negative news is already in the price for the Aussie dollar,” Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “We look to accumulate longs on the relative value basis.”

The so-called Aussie rose 0.1% $1.0193, after earlier weakening as much as 0.3%. It jumped 0.8% to NZ$1.2141, rallying from a more-than three-year low of NZ$1.1958 yesterday.

German Data

The euro extended its advance after a report showed German industrial production rose 1.2% in March from a revised 0.6% expansion the previous month. That was a second month of gains and compares with a 0.1% contraction forecast by economists in a Bloomberg survey.

“The market was surprised by the German industrial production figures and that what’s driving the euro,” said Lutz Karpowitz, a senior currency strategist at Commerzbank AG in Frankfurt. “However, the picture is still very mixed. Europe as a whole is still in a recession.”

One-week implied volatility for the euro-dollar rate, based on currency option prices, was at 7.24%, the lowest since Jan. 9.

Bloomberg News

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