In a fairly dramatic Press Release last night (GMT terms), the governor of the Reserve bank of New Zealand once more placed the weight of his authority behind efforts to reduce the value of the New Zealand dollar, or Kiwi.
You can read the full text here: “Why the NZ exchange rate is unjustified and unsustainable”
And his words have had the desired effect. The currency is down across the board this morning. The Aussie dollar, which had already been on a slide, is further reduced in sympathy with its antipodean neighbour.
Mr. Wheeler also threatened the possibility of market intervention by the RBNZ, to back up his jawboning. We have suspected for some time that this is already happening. One way or another, Mr. Wheeler is one of the most successful central bankers when it comes to depreciating his country’s currency. His counterpart in Switzerland, about whom we commented recently, must be just a little bit envious.
Is the ECB closer to Quantitative Easing?
Meanwhile, a hemisphere away, our own Mario Draghi is having a similar effect on the Euro with his pronouncements. Certainly, the ECB has a far more complex set of issues to deal with than the New Zealand central bank but the measures proposed to combat the threat of deflation in the Eurozone will have the side effect of reducing the Single Currency. As this, in turn, will also increase the attractiveness of Eurozone exports, it will be just as welcome.
In a pre-released text of an interview for a Lithuanian newspaper, Mr. Draghi is reported to have said:
“As regards monetary policy, we remain fully determined to counter risks to the medium-term outlook for inflation”
The market, this morning, seems to be interpreting this as the prelude to full scale Quantitative Easing. While we already have a short position in EURUSD, we will also await developments. The Germans, among others, are not keen on QE.