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Forex Flash: RBNZ comments overblown based on NZD performance – BNZ

FXstreet.com (Barcelona) - It was a busy series of days for New Zealand’s central bank earlier this week. It released the May FSR, introduced the first of its macro-prudential tools, sounded hawkish, sounded dovish, and confirmed it had intervened in the NZD. However, According to the BNZ Research Team, “Governor Wheeler’s comments about intervention appear to have been overblown and misinterpreted to us. From this perspective, the ¾ of a cent falls in the NZD/USD and NZD/AUD look like an overreaction.”

We suspect the “intervention” Governor Wheeler was talking about was the “passive” intervention the Bank restarted in November last year. Moreover, we doubt the Bank has been involved in any bazooka-style “active” interventions – the conditions for such have not yet been met in our view. Passive intervention is generally done in smaller amounts and is not designed to influence the level of the currency ­– something Wheeler reiterated yesterday.

Indeed, since November, the RBNZ has only net sold a total of $291m NZD. This is but a drop in the ocean in a market that trades an average of US$32b a day. Still, “we suspect the Bank’s passive intervention stepped up a gear in April as the NZ TWI soared to fresh post float highs.” they add.

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