NZ Central Bank Raises Possibility of FX Intervention if NZD Remains High

 
   By Rebecca Howard 
 

        WELLINGTON,New Zealand--The New Zealand dollar is overvalued and if it remains high the central bank could opt to intervene in the currency market, Reserve Bank of New Zealand Governor Graeme Wheeler said Wednesday.
        In a speech to the DairyNZ Farmers' Forum in Hamilton, Mr. Wheeler said if the "currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell NZ dollars."
        In late 2012 and early 2013 the central bank sold local currency holdings to help rein in the soaring New Zealand dollar for the first time in nearly four years.
        Known as the Kiwi, the New Zealand dollar has gained nearly 4% against a basket of currencies so far this year. The New Zealand dollar has pushed higher partly due to record high terms of trade as the agriculture-rich economy has been aided by a surge in demand from Asia's growing middle classes for dairy products.
        Mr. Wheeler also said the high dollar--along with new economic data--will be a factor in the central bank's assessment of the extent and speed with which the official cash rate needs to be raised.
        The New Zealand central bank raised rates in March and again in April bringing them to 3.0% as the nation's economic expansion gains momentum and inflationary pressures increase.
        The move to increase rates comes in contrast to other developed economies around the world, with the Federal Reserve and European Central Bank both holding rates well below 1%.
        The New Zealand dollar fell to US$0.8703 after his comments from US$0.8742 prior to the speech.
        Write to Rebecca Howard at rebecca.howard@wsj.com
        (END) Dow Jones Newswires

        May 06, 2014 18:13 ET (22:13 GMT)