Despite a temporary standstill, currency war rages on and individual countries continue to discuss whether they should enter or watching their currencies continue to appreciate. Nowhere is this debate is stronger than in New Zealand whose Kiwi declined 37% currency against the dollar after its peak in early 2009 and over 15% since June this year.
In most countries, the cries of war come from the political establishment who must demonstrate their constituents that they are monitor currency war. This is mainly for New Zealand as members of Parliament strongly argue in favor of intervention.Prime Minister John key is a bit more pragmatic: it "said his Government is concerned about our dollar, but was not convinced intervention will work … politicians who think interference may occur without economic consequences are fooling themselves. Showing understanding of Economics, he wisely pointed out that trying to limit the Kiwi appreciation will take the form of higher inflation, higher interest rates and/or reduced access to capital.
This is essentially the position of Alan bollard, Governor of the Central Bank of New Zealand.He insistently (correctly) that New Zealand is driving up as much as his colleagues – namely dollar – are down, completely disconnected from New Zealand and way beyond its control such as if New Zealand tried to intervene, it would quickly be reduced (perhaps intentionally) speculators. Eventually it will end up wasting a lot of money and Kiwi will continue to appreciate.
Mr. Knecht said that stronger currency is not without its benefits such as lower relative prices for certain natural resources such as oil also because New Zealand is mostly of commodities, its producers are expensive currency in the form of higher prices for milk, wool and other primary product exports. While her other manufacturing operations were punished, Kiwi, its economy is still relatively high. As a result of some taxes and low interest rates in the history of New Zealand's GDP is forecast to return to the trend in 2010 and 2011.
New Zealand concerns, understandable, and no argument to prevent dollars which are FED from raising unproductive for QE2 in New Zealand at the same time, New Zealand is not attractive for speculators.Its benchmark interest rate at 3%, is relatively low than in developing countries.Its current account balance is projected to continue declining, possibly up to 8%, which means that net capital inflow is actually from New Zealand. Furthermore, although the Kiwi dollar appreciated against the United States, he was a powerfully against the Australian dollar route to multi-year lows.
Moving forward, there is reason to believe that the Canadian dollar will continue to appreciate against the USD United States on the QE2 and overall sense of pessimism to the United States; the same is true of currencies which actively intervene to prevent an appreciation of their currencies. Nevertheless, I don't think the New Zealand dollar reaches parity against any currency – anytime soon, and once the currency of the quarrel subsidies, it is likely to trend towards its long-term average.
0 comments:
Post a Comment