The New Zealand dollar retreated from its recent highs against the other major currencies in the Asian session on Wednesday following comments by Reserve Bank of New Zealand Governor Graeme Wheeler that he still considered the currency “unjustified and unsustainable”, a key criteria for intervention.
Wheeler said to the Parliament’s Finance and Expenditure Select Committee, “We still think the exchange rate is unjustified and unsustainable.”
“We’d like to see more movement downward in the exchange rate,” he added.
The currency climbed earlier after Wheeler omitted the previous reference to its level being unjustified during the release of the Reserve Bank of New Zealand’s semi-annual financial stability report in Wellington.
In the semi-annual financial stability report, the RBNZ said that the financial system is sound and is continuing to support growth in the economy, but faces significant risk.
In the report, the bank also said that the changes “involve a new restriction on loans to property investors in the Auckland region with a (loan-to-value ratio) of greater than 70% (i.e. to set a speed limit on such loans at close to zero).
Wednesday, the NZ dollar fell against its major rivals, as speculation that the Reserve Bank of New Zealand is likely to cut its key interest rate as early as next month gained ground. The NZ dollar fell 0.35 percent against the U.S. dollar, 0.18 percent against the yen, 0.71 percent against the euro and 0.87 percent against the Australian dollar on Wednesday.
In the Asian trading today, the NZ dollar fell to 0.7360 against the U.S. dollar and 88.18 against the yen, from early 2-day highs of 0.7421 and 88.89, respectively. Earlier, the kiwi fell to nearly a 2-month low of 0.7316 against the greenback and more than a 2-month low of 87.71 against the yen.
If the kiwi extends its downtrend, it is likely to find support around 0.71 against the greenback and 85.50 against the yen.
Pulling away from an early high of 1.0768 against the Australian dollar, the kiwi dropped to 1.0846. This may be compared to an early near 6-month low of 1.0882. On the downside, 1.12 is seen as the next support level for the kiwi.
Against the euro, the kiwi edged down to 1.5239 from an early 2-day high of 1.5119.This may be compared to an early low of 1.5314. The kiwi may test support near the 1.58 region.
Looking ahead, the results of Japan Ecowatchers’ survey for April and a slew of reports from China, including retail sales, industrial production and fixed asset investment are due to be released.
Preliminary German first quarter GDP data and final CPI data for April is due to be released at 2:00 am ET.
In the European session, U.K. unemployment report for March and Eurozone first quarter GDP data and industrial production for March are set to be published.
At 5:30 am ET, Bank of England Governor Mark Carney will hold a press conference, along with other MPC members, to publish updated growth, inflation and unemployment forecasts.
In the New York session, minutes from the European Central Bank’s recent monetary policy meeting, U.S. advance retail sales data for April, import price index for April and U.S. business inventories for March are slated for release.
The material has been provided by InstaForex Company – www.instaforex.com