Kiwi Slides After Central Bank Says It Wants “A Decline In The Exchange Rate”

Add another country to the list of Trump twitter targets who want to devalue their currency.

Moments ago, the Reserve Bank of New Zealand held its key rate at record-low 1.75%, as expected, however what unleashed a violent selling reaction is what Governor Greame Wheeler said in the statement, in which he made it clear, yet again, that the Kiwi is overvalued and that the “exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector.  A decline in the exchange rate is needed.”

Which was about as clear a statement of intent as one needs, and the NZDUSD reacted appropriately.

Wheeler noted that “headline inflation has returned to the target band as past declines in oil prices dropped out of the annual calculation.  Inflation is expected to return to the midpoint of the target band gradually, reflecting the strength of the domestic economy and despite persistent negative tradables inflation.  Longer-term inflation expectations remain well-anchored at around 2 percent.”

However, his conclusion suggested that no rate hikes are coming any time soon: “Monetary policy will remain accommodative for a considerable period.  Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.”

This post originally appeared on Zero Hedge


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