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NZ Dollar Strongest After Letter from Finance Minister to RBNZ

November 24, 2020 at 8:24 by Vladimir Vyun

Kiwi denominationsThe New Zealand dollar was the strongest among the most-traded currencies on the Forex market today. The most likely reason for such a great performance was the request made to the central bank’s chief by the finance minister.

New Zealand Finance Minister Grant Robertson wrote to Adrian Orr, Governor of the Reserve Bank of New Zealand, suggesting that the central bank should include house prices in its mandate:

One proposal I am seeking advice from the Reserve Bank is on whether to include stability in house prices as a factor for consideration in the remit when formulating monetary policy.

Robertson was concerned that the surging house prices in a zero-interest rate environment may create a housing bubble. Orr responded, saying that he will be glad to work with the government but the RBNZ is already considering house prices in its decisions:

I can assure you that the MPC [Monetary Policy Committee], in making its decisions, gives consideration to the potential impact of monetary policy on asset prices, including house prices. These are important transmission channels that affect employment and inflation.

Nevertheless, market participants thought that the request may discourage the central bank from adding even more stimulus and cutting interest rates into the negative territory. That, together with optimism caused by positive news about the development of the COVID-19 vaccine, allowed the kiwi to gain on its major rivals.

NZD/USD jumped from 0.6921 to 0.6992 as of 8:22 GMT today, trading near the highest level since July 2018. EUR/NZD dropped from 1.7095 to 1.6978, being near the lowest since February. NZD/JPY gained from 72.31 to 72.94, staying close to the highest since January.

If you have any questions, comments, or opinions regarding the New Zealand Dollar, feel free to post them using the commentary form below.

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