NZ dollar slumps as central banks intervene

Photo / The Listener

The New Zealand dollar fell more than 1 USc to 85.3 USc in afternoon trade as currency markets globally were convulsed by central bank intervention.

The local currency's sharp fall vs the US dollar followed hard on the heels of early afternoon (NZ time) intervention by the Bank of Japan to pull the yen lower.

The Japanese intervention followed a surprise intervention overnight by the Swiss National Bank to push the Swiss Franc down from record highs against the US dollar.

The Swiss National Bank slashed its cash rate to 0 per cent and warned it was determined to help its exporters survive by intervening to drag its currency down.

Talk has grown in recent days that the US Federal Reserve will embark on a third round of Quantitative Easing or money printing known QE III to revive a stalling US economy.

This would also have the effect of devaluing the US dollar against other currencies.

A spokeswoman for the Reserve Bank of New Zealand said the bank did not comment on whether it had intervened in the foreign exchange market.

The Reserve Bank intervened in 2007 when the Trade Weighted Index got over 77, but Reserve Bank Governor Alan Bollard and Prime Minister John Key have recently both commented that exchange intervention was not effective.

- INTEREST.CO.NZ