KEY POINTS:
The US79c mark has been breached - and US80c has now become the new benchmark for our soaring currency.
Here is the latest selection of Your Views:
Andy (Torbay)
The problem of the sky-high Kiwi is caused primarily by the NZ interest rate which is constantly hiked in a blunt effort to curb consumer spending & inflation. Spending would be far better controlled by a significant increase in GST on discretionary goods, most of which are imported (and at the same time abolishing the imposition of GST on food - why the hell should we be taxed for the privilege of eating and feeding our children?). Cullen says the government can do nothing about the dollar. What rubbish. Instruct Bollard to reduce interest rates by 2 per cent this month and watch the bubble burst. The truth is it's far easier for limp-wristed politicians to plead impotence than to do something positive to help the NZ export sector. Good-bye manufacturing, good-bye employment, good-bye Labour and more fool those who voted them in last time round.
Peter
Several Asian countries used to depress their exchange rates buying US treasury bills on the pretext of building up foreign reserves to add stability to their economies. Now that US treasuries are not so attractive these countries are now continuously buying Euros, GBPs, AUDs, NZDs. The latest newcomer, China with USD 1 trillion+ foreign reserves (still not enough to float their Yuan)is taking an extra step, instead of burying debt instruments for their foreign currency reserves they will buy equity, mineral reserves, property. We are in the midst of a currency based trade war on a vast new scale, New Zealand manufacturing and jobs will amongst the first victims. Cullen needs to restrict inwards foreign investment to that which adds to the NZ's productive capacity or creates high value jobs (some Asian countries also happen to have effective legislation to achieve this).
David B
It's always somewhat frustrating to see so many comments on here that give one cause for a particular event. The overvalued NZD does not have one solitary cause nor one solitary fix.The housing market, consumer spending, heavy government spending (don't deny it labour supporters) and in turn inflation has been forcing the dollar higher. US trade deficit and USD weakness and their weak housing market has also somewhat affected it, though the NZ dollar has risen significantly against all major currencies as far as I have seen. Currency speculators and other investors are fueling the rise of the NZ dollar. Honestly I don't know whats going on behind the scenes, but I do know that there is more than one issue here. Don't delude yourself into thinking that there is only one cause, it may just be a correlated event. The fact of the matter remains that the higher the NZD goes the greater the risk of a dramatic correction. Even from my limited knowledge, I'd say it's definitely on the cards.
Mark (Hong Kong)
No one can or will do anything until the wheels come off. That's because you live in a democracy. Everyone who can do anything relies on the punters for their continued largess. Me - I live in a dictatorship. As a teacher in Hong Kong I've just been given an 8 per cent pay increase without asking (I already earn 50 per cent more than I did in NZ, even with the exchange rate). The govt here collected too much tax last year so they are returning it via rebates. They collected too much tax this year so there's talk of lowering the top tax rate from an onerous 19 per cent. Everything (except housing) costs half the price it does in NZ. And the currency is pegged to the USD at a level that makes the country's goods and services competitive. Money rules and big business conducts its affairs unencumbered. Hong Kong is also polluted, overcrowded and, in case you missed it, a dictatorship. What the punters think doesn't matter so the govt can have a long-term vision and see it through without the peaks and troughs and without someone winding it all back. Mr. Bollard will keep putting up interest rates because his job depends on it. Dr. Cullen will keep spraying money at the lower (and least productive) socio-economic groups because they will vote him back in. And the screen jockeys in London trading houses will continue to make a fortune at your expense because they can. If you want an economy where politicians leap in with quick-fixes, move to Zimbabwe. Otherwise, celebrate the fact you live in a democracy.
Kim (Auckland)
Can someone please explain why goods (other than the cheapie plastic stuff at the Warehouse) still cost two to three times as much as they do in the US when our dollar is so high? For example, I should be able to walk into Smith and Caughey's and buy my moisturiser for half of what I was 8 years ago but it's still $100. But Smith and Caughey's is buying it from Lancome for half of what they were paying 8 years ago. We're being duped. Time for a vacation to America so I can stock up on everything I need before the dollar crashes again.
Andy (Auckland)
Someone is going to make a load of cash off this. The people posting here might make a little because we're paying attention and have got the brains to out think this. The people in the know with connections are going to make heaps. The idiots buying property and shopping at the big red shed will loose everything. Part of the reason the money is flowing here is that it's got no where else to go. China and other countries have bought all the US bonds they can afford to, the US market is overblown (I think the Dow is past 15,000 now), gold and oil have had a good run up with price increases for the next decade factored in already, housing markets are on the verge of collapse, emerging markets are risky when there is still so much corruption, where would you be putting your money?
Mercedes (Auckland)
This news is sad and unfortunately the man on the street doesn't give a toss about it. You start talking about exchange rates and the dollar and they look at you like you're from mars. No one will give a toss until they've all lost their jobs because companies are forced overseas and then they'll over reach and throw whoever is in power out not realising that they had something to contribute to this mess because they insist on cheap foreign goods. No drop of water claims responsibility for the flood. The Economist named the kiwi the most overvalued currency in the world (as compared to the US dollar) last month when the rate was lower. Who knows what they are going to say about it now. But part of this has to do with the United States. Americans keep borrowing and borrowing and forcing their dollar lower and lower. We're in a bad spot. If we keep interest rates low, these mad immigrants with limitless supplies of money will keep running up the property market and if we raise interest rates the mad Japanese will keep buying Uridashi bonds. What are we to do? Are we being set up for the big fix like the Thai currency crisis of 8 years ago?
Sam (Ngaruawahia)
Housing mortgage rates will go up again, raising the dollar even higher, making imports cheaper again and the shopping frenzy continues, forcing more rate increases and the cycle continues. Mr Bollard, stop shops from giving credit holidays, re-payment holidays, then people will stop "buying" imported goods on the "never-never". But then the big stores will collapse and shut down, increasing unemployment and that cannot be allowed to happen. So the poor home owner with a mortgage ends up paying for the shopping splurges of the irresponsible ones. Dr Cullen, stop being an ostrich and hope the problem will go away if you ignore it, do a Roger Douglas and devalue the dollar today to 65C/US and to hell with the foreigners reaping the rewards and taking their profits out of the country.
Gazza
With an election looming in the near future our politicians are scared of dealing with this one. Internally generated unproductive activity centred on the housing market is eroding our productive export sector. Imposing a property tax on the speculators to correct this distortion would be a quick and reasonable fix. Unfortunately there are many more votes at stake amongst the nation's property owners that there are amongst the export sector. Cullen certainly doesn't have the gonads to deal with it. I doubt any of the other parties will stick their neck out on it either.
Steve
As a currency dealer, I feel the need to make the following observations about some currency assumptions people have incorrectly and understandably made on these postings - it may help the debate:Governments don't control markets - the reverse is true. For example, the benefits of kiwisaver won't be be felt for at least another 10 years, when there will have been at least two new governments. The Reserve bank is independent from parliament and its operating policy has been cobbled together over a long period by a succession of governments. So don't be surprised it sounds contradictory, and shoot the messengers. Whilst the Reserve Banks currency intervention may be ineffective, the country won't lose money on it. As the NZD weakens the reserve bank can sell NZ dollars against US, pocketing a huge difference on behalf of the taxpayer.The strength of the NZ currency has more to do with the relative strength or weakness of the US and Japanese economies than either Reserve Bank interest meddling or the so called carry trade. So relax, New Zealanders, it ain't your fault. You live in the best place in the world. Enjoy it.
Adrian
The USD / NZD will exceed 80 cent levels this week. I note that today the Sydney Morning Herald has an article about the future interest rate hikes by Mr Bollard.
Then there is Mr Cullen warning speculators about the risks. Please Mr Cullen these people make millions of $ every hour on the FX market and have more experience about the market than you. Why don't you focus on reducing government spending in non productive areas which in turn will lower both inflation and interest rates which in turn will cause the USD / NZD to fall. Oops I forgot we are heading into an election year so that will not happen. Mr Bollard and his team of experts must find an alternative to continuing to increase interest rates to slow down the economy.If they can not do this then get a new team in who can.
John (Wellington)
Anyone thinking this is a bonanza or landslide for importing cheap goods, better go check out postal and shipping rates. They've nearly quadrupled over the past few months practically offsetting the savings you might expect from a higher dollar. US exporters have been increasing their prices to offset the higher raw material costs from suppliers in Asia. So when the bubble eventually pops, not likely to happen under labour who are masking real inflation by doing everything to keep the dollar inflated, then we'll see inflation for what it really has become. The Kiwi won't be worth the paper it's printed on and there'll be no exporters left to fix the economy. Labour have wrecked this country, were now nothing but a 3rd class debt infected blotch at the bottom of the pacific, slave to our Asian landowners. Nice one Helen! you've made a bigger mess than Muldoon.
Kiwi in Hong Kong
Kiwis have the best chance ever to go out and sell on export. The high dollar makes it cheap, but if the government had stopped the property speculation junta of real estate sharks, lawyers, valuers, agents, etc. the high dollar would never have happened. Now they just sitting at home moaning at each other.
Murray
Quite frankly, it does not worry me too much as the corresponding rise in interest rates will be beneficial. The way to stop the dollar, is to change the government and elect a government that does not rely on no productive spending to buy votes from those who have nothing better to do than wait for handouts. Its called the nanny state.
Andrew
You say "If our dollar is strong because of our economy, what is so wrong with us reaping the benefits of the high dollar and pay less for imports for a change?" Fair call if our economy was strong - that is, strong on that back of productivity. The problem is our economy is "strong" on the basis of debt - we spend around 15 per cent more than we earn [the difference is going into imported goods], and this is primarily because we've been borrowing on the back of our over-inflated property market, as people feel richer than they really are. This has been going on for so long now that our entire economy is evolving to this new "normality", and that's terrible because we can't borrow forever, and those debts have to be paid back. Our over-rated dollar is ruining the very thing that we need (export sector) to correct our trade-balance. The true economy hasn't really been booming at all - our borrowing has been masking a serious failure in productivity-growth (in fact achieving the opposite).
Andrew
Our over-rated dollar is destructive on 2 levels - it tells existing exports to give up and close down, and it tells future exporters to steer clear of proven-to-be high risk New Zealand. Please do not vote for the Labour party in the coming election.
Ema
I'd say that now would be a good time for our oil companies in New Zealand to purchase oil.
Sandra
If our dollar is strong because of our economy, what is so wrong with us reaping the benefits of the high dollar and pay less for imports for a change? It's not as if anything else we purchase is going down in price, only items affected by the overseas dollar. If the dollar goes up it doesn't give us any more money in our bank accounts or wallets. Only those people playing the overseas market make money. And when interest rates go up because of inflation on goods that we can't control such as cars, petroleum products, or investment housing our outgoings such as mortgage, utilities, transport costs gets harder to pay for because of the flow on effect of inflation yet in effect we aren't any richer than we were before. No he shouldn't raise interest rates.
Leonard Lee
We all know what Bollard is trying to do. In his pathetic attempt to control "inflation" and "spending" he'll drive New Zealand businesses offshore or into closure, create massive and sudden unemployment, and essentially root our economy. Let the economy grow and the people prosper! Market forces will ultimately self regulate and correct the economy to an equilibrium level. I vote that Bollard and his crew be asked to resign with immediate effect - we need some younger blood with a better idea on how a global 21st century economy works.
Pete
Here we go again. The Forex market is many times bigger than Bollard's reserve. The intervention only delayed the current market prices we are currently seeing my concern is all the money he could have avoided losing intervening the NZD at USD 0.79 instead of the interventions at USD 0.76 probably the losses run in the millions. But I suspect he does not lose much sleep over it because as Governor, he could always 'print' more NZD. Clearly whatever action Bollard decides to take next will not win votes for the government. The question now is, does he even care and will it even matter?
StuBaby (Auckland)
While the US remains in Iraq their economy will remain battered. You simply can't ship 500 billion offshore without a negative effect on your bottomline. Once the US pulls out, the NZ dollar will start to retreat. Until then, continue to watch headlines that contain words like "Another 22 year high". So to all importers, pay off all your debts now and buy a good supply of US dollars, the worm will turn.
John
It's about time the consumer got the chance to have a share of the cake. I for one am making the most of the strong dollar by importing the things I want.For too long we hear about how our exporters are making money and how the farmers were making a profit. Now it's our turn to reap the benefits. The dollar won't stay high for long so suck it up and enjoy it while you can.