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Expectations of RBNZ 'intervention' all the more intense - BNZ

FXStreet (Bali) - Craig Ebert, Senior Economist at BNZ, shares his view over the latest intervention threat by the RBNZ, which has helped the NZD bear case by cheapening the rate close to 0.78 at present.

Key Quotes

"Expectations of RBNZ “intervention” are all the more intense now, following Governor Wheeler’s strident statement/speech of last Thursday, laden, as it was, with threats of such. Some have argued that the speech was, amongst other things, a deliberately timed prelude to evidence of NZD net selling in today’s transaction numbers. We’ll see."

"And it’s the facts of the matter that might ultimately hold sway – rather than debate over whether the Bank is “just” passively transacting in a balance sheet kind of way, or actively doing so with the aim of stepping up its public jawboning. Talk can be cheap."

"Wheeler’s talk of last Thursday certainly seemed well timed in the sense it helped knock NZD lower. Indeed, the extent of the move down in the exchange rate has caught even us on the hop, bearing in mind we have been at the bearish end of NZD forecasts for a while now. To keep the initiative, we have today massaged down our view on NZD (while also factoring in a weaker outlook on EUR), as part of our updated NAB Global FX Strategist. The near-term NZD track has been lowered by 2 cents, with the end-2014 target now 0.78 (0.80 previously), but with the end-2015 target unchanged at 0.73."

"To be sure, this doesn’t affect our view on monetary policy. While we’re always averse to using a strict MCI trade-off in any case, the real point is that a petering TWI is necessary to the OCR (hike) profile we have. So, even with the tweaks we’ve made to our currency track, it principally shrinks the risks of disappointment on our OCR track, essentially better shoring up what we have. That is, a next hike in March, a 4.50% OCR by end-2015 and a 4.75% peak by early 2016."

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