The New Zealand dollar (NZD) value rose and, for a short amount of time, was worth US$0.7932, the highest level in New Zealand since the dollar was floated in 1985 – 22-years-ago.

The value then dropped a little and as of 11.40 a.m. was trading at US$0.7925. This was due to the Reserve Bank of New Zealand announcing that it will intervene next week at their Official Cash Rate review if the dollar continued to rise.

Economists are predicting that the NZD will now go above US$0.80.

The cause of this rise was mainly due to the release of the June quarter retail sales data. The consumer price index data showed that sales increased by 1.2%, instead of the predicted 0.4%. The bigger than expected sales data were mainly due to supermarket, car and petrol purchases. In May, the core sales figures showed a 0.8% rise, these figures excluded car and fuel sales.

Economist correspondents for Radio New Zealand have also said that a weak US dollar is also to blame for the rising New Zealand dollar. Danika Hampton, currency analyst for the Bank of New Zealand, says the NZD is looking expensive and doubts if it will maintain it’s current high figure.

Michael Cullen, the finance minister of New Zealand, has said that investors will be hurt when the New Zealand dollar does fall. Dr Cullen personally believes that the NZD is currently overvalued.

The Wellington Chamber of Commerce has called for the New Zealand Government to slow down it’s spending. Charles Finny, from the Chamber of Commerce, says this is one of the core factors and not oil and housing markets as much as has been speculated. Oil prices are at a current 11-month world high.

The retails sales figures also resulted in Government bonds being weakened. The two-year and ten-year Government bonds are at 7.61% and 6.82% respectively.

The Official Cash Rate is currently at 8%, due to other interventions by the Reserve Bank.

The NZD is also trading well against the Australian dollar and Japanese yen.

Sources:

3 News

Radio New Zealand

One News

One News

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