The New Zealand dollar dropped versus its 16 major peers after Reserve Bank Governor Graeme Wheeler said a high currency in the face of weakening fundamentals may prompt the central bank to intervene to sell it.
The kiwi fell from near its highest level in almost three years against the greenback, reached yesterday even as whole milk powder prices declined for a sixth straight auction. A U.S. dollar gauge was near its lowest level since October as this year’s forecast increase in Treasury yields hasn’t materialized and low volatility spurs demand for currencies with higher yields. The euro held yesterday’s gain with the European Central Bank forecast to keep benchmark interest rates unchanged when policy makers meet tomorrow.
“Today’s comments, and the dairy auction results, should keep the New Zealand dollar under some pressure,” said James McIntyre, a senior economist in Sydney at Commonwealth Bank of Australia. “The likelihood of the RBNZ intervening is quite low, and as we have seen in the past it has had limited lasting impact on the New Zealand dollar.”