More commentators on the NZ dollar
As mentioned here earlier, the high NZ dollar is a symptom of domestic imbalances not a cause – so instead of looking at intervening in the dollar we should be trying to understand exactly what is driving structural issues in the economy.
A couple of articles that follow on in this view are:
- Brian Gaynor in the Herald, discussing the incentives towards property investment.
- Westpac on the indirectness of any link between the OCR and our structural issues.
With the Westpac piece everyone jumped on the idea that “a lower OCR doesn’t necessarily imply a lower currency”, which is true. However, I felt the main point was more to do with the inability of monetary policy to solve structural problems in the economy – a point I agree with completely.
Regardless of what drives your interest, I think it definitely pays to look underneath the surface to uncover what really drives the market.
Absolutely.
Relative value (or more precisely return based on relative interest rates) drives a lot of what is going on behind the Kiwi. Its strength reflects an ongoing expectation that interest rates in NZ will remain higher relative to Japan (especially) and to a somewhat lesser extent other major economies.
Dicking around with the FX market(a la the funny money brigade) is like playing that Gopher game. You try to hit the gopher but a) you will likely be too slow and b) it will pop up somewhere else.
“However, I felt the main point was more to do with the inability of monetary policy to solve structural problems in the economy – a point I agree with completely.”
Unfortunately, those in authority sometimes fail to seek root causes of problems and are blind about the flaws of their policies.