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Forex Flash: RBNZ intervention is fruitless - Nomura

Nomura Strategist Geoffrey Kendrick believes that RBNZ intervention will prove to be a fruitless endeavor.

He comments that last night's speech by Governor Wheeler has markets second guessing whether the bank will now start genuine FX intervention. Kendrick writes, “Although this cannot be ruled out, we would agree with the Governor that intervention is unlikely to be successful, outside of an initial signaling impact. The largest month of FX intervention (July 2007) saw the RBNZ sell NZD1.5bn. In January non-residents bought NZD1.6bn of government debt.”

Consequently, a strict reading of the RBNZ’s FX intervention mandate (a reasonable chance of success) says it will not intervene and that this is just rhetoric. In either event we think it is too small to succeed. He is long NZD/USD from yesterday, looking for fresh highs (above 0.8843). He thinks that the Governor’s speech has created better entry levels to add to that trade.

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