1.15pm
Finance Minister Michael Cullen has continued his attack on the high flying dollar saying the markets are acting in an "irrational" manner.
The New Zealand dollar momentarily crossed the United States 70 cents mark last night and looks set to break its post-float high in the near future.
Most of the strength is related to the continuing decline in the US dollar, but Dr Cullen told the finance select committee today that foreign exchange traders' analysis of the strength of the dollar defied belief.
The markets did not seem to take into account New Zealand's current account deficit, he said.
"I do find market reaction slightly irrational given the trend of the current account deficit," Dr Cullen said.
While the weakness of the US dollar was one judgment of the market, Dr Cullen said it was even more difficult to understand the New Zealand dollar's high value against the Australian dollar and the European Union euro considering the strength of their economies.
Dr Cullen said the value of the dollar was probably his most serious concern about the economy.
He declined to say what level the Government would prefer the dollar to be at but recalled that he had said the dollar was undervalued at US38c and was unhappy with its level now.
When the dollar hit the US61c mark, Dr Cullen expressed serious concern about the exchange rate and told the same committee he was not without options to intervene.
Today, opposition MPs again called for Dr Cullen to say what he would do and when he would do it.
ACT MP Rodney Hide said Dr Cullen's hand must be on the trigger.
Dr Cullen acknowledged there were many "booby-traps" in direct intervention by trying to sell down the dollar.
Dr Cullen told the committee that despite concerns about the dollar's effect on exporters the economy in general continued to outperform Treasury's forecasts and these would be revised upwards.
The budget, which he said would be in late May, would reveal a healthy set of books.
Despite this there would be no chance of tax cuts.
The Government had decided it was best to redistribute wealth and help out low-income working families with financial assistance of more than $1 billion.
The budget would also include some assistance to exporters.
Dr Cullen said this would have to comply with World Trade Organisation rules about subsidies, but the Government wanted to reduce some of the pain caused by the high dollar.
- NZPA
Cullen labels markets irrational as NZ dollar passes US70c mark
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