The Reserve Bank of New Zealand believes currency traders are mispricing the nation’s dollar and should take more notice of falling commodity prices even as interest rates rise, Assistant Governor John McDermott said.
“The terms of trade could be at a turning point, we’re certainly getting prices for dairy falling,” McDermott, who heads the RBNZ’s economic department, said in an interview in Wellington late yesterday. “The New Zealand dollar is a commodity currency. It should move and if people were pricing it right, now is the time for it to be moving down.”
The kiwi soared the most in four months yesterday after the central bank raised interest rates for a third time this year and signaled more increases to come. While the strong currency is damping inflation, RBNZ Governor Graeme Wheeler said he expects the exchange rate to decline.