New Zealand Dollar Higher After RBNZ Targets Auckland Housing Market

 
 
   By Rebecca Howard 
 

        WELLINGTON, New Zealand--The New Zealand dollar was higher late Wednesday after the Reserve Bank of New Zealand proposed tighter mortgage-lending rules for its largest city in a bid to mitigate a key risk to the country's financial system.
        The central bank is proposing several changes to its existing macro prudential policy. In October 2013 the bank imposed new rules under which no more than 10% of banks' new mortgage lending can go to borrowers who put down less than 20% of the property price as a deposit.
        Among other things it now proposes--as of Oct. 1 this year-- it will require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30%.
        The Kiwi rose on the announcement as "it was seen by the wider market as a good thing," says Chris Hunter, corporate dealing manager at Western Union Business Solutions.
        It also added to the view that the central bank will likely move to lower interest rates in the near future. ASB Chief Economist Nick Tuffley said he still expects the central bank to cut the rate by 25 basis points in September and October but said the RBNZ's housing action adds to his view that "the risks are tilted to an earlier start."
        He underscored that "the proposed clamp-down on Auckland residential investment property will help the RBNZ contain the financial stability risks it sees around property."
        Later in the session the Kiwi dipped when Reserve Bank of New Zealand Governor Graeme Wheeler told a parliamentary committee the central bank still views the strong New Zealand dollar as "unjustified and unsustainable."
        Earlier the central bank's twice-yearly financial stability report also referred to the Kiwi dollar as "above its sustainable level." That it left out the word "unjustified" caught some analysts by surprise.
        Mr. Wheeler later reiterated that "we still think the exchange rate is unjustified and unsustainable and we'd like to see a movement downwards in the exchange rate", which pushed the Kiwi lower.
        It "sucked some of the wind out of the Kiwi's sales but it has since recovered," said Mr. Hunter.
        In Wellington, the New Zealand dollar was at US$0.7389 versus US$0.7367 late Tuesday and at A$0.9261 versus A$0.9286.
        Write to Rebecca Howard at rebecca.howard@wsj.com
        (END) Dow Jones Newswires

        May 13, 2015 00:47 ET (04:47 GMT)

#FX
#Forex
#SaleForex
#NewZealandDollarHigher
#RBNZ
#AucklandHousingMarket