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How much can the RBNZ intervene? - Westpac

FXStreet (Bali) - Michael Gordon, Senior Economist at Westpac, provides an answer to the question of how much firepower the RBNZ has to intervene in the NZD market.

Key Quotes

"It depends on the direction. The RBNZ holds foreign currency reserves of around $9bn, which can be used to support the NZ dollar in a crisis situation."

"In contrast, intervening to weaken the NZ dollar would involve buying foreign currencies, so the amount of foreign currency already on hand is irrelevant."

"What the RBNZ would need are NZ dollars to sell – and in theory there’s no limit to how many of those it can come up with. The main constraint would be maintaining consistency with the PTA, as weakening the exchange rate would add to inflation."

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