Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ Responds to Currency Concerns. (News Releases)

Academic journal article The Reserve Bank of New Zealand Bulletin

RBNZ Responds to Currency Concerns. (News Releases)

Article excerpt

24 January 2003

The Reserve Bank today explained how exchange rate movements impact on monetary policy. This follows calls from exporters for the Reserve Bank to consider their needs when making interest-rate decisions.

Speaking to the Canterbury Employers' Chamber of Commerce, Reserve Bank Governor Alan Bollard said that the Reserve Bank acknowledged the concerns of exporters in the face of the rising exchange rate, especially relative to the Australian dollar, and the speed and unpredictability of that appreciation.

Explaining the currency appreciation, Dr Bollard said "Our economy has performed very well - indeed, surprisingly well in the last year or so. New Zealand is one of the few developed countries where economic forecasts were revised up last year. Amid a rather gloomy world outlook, investors have been attracted to favourable growth surprises. And... it was a year when solid, secure, fixed-income returns seemed to come back into focus among the investor community.

"Validly or otherwise, markets have taken the view that the New Zealand economy is growing more robustly than Australia's at present," and "For investors, the US "miracle" has turned sour. ... When the US is no longer flavour of the decade, there was only one way for the US dollar to go. …

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