Forum Archive Index - February 2004

[mixtrader <mixtrader@clear.net.nz>]

Hi Baa Baa

TSHTF already!  NZ Exporters are now truly suffering as are numerous
industries that operate in support of exporters.

There are no limits on an exchange rate that is in free float.  Soros proved
that with his actions against pounds sterling a few years back - a single
trader does have the ability/capacity to influence the value of a currency
if they wish to prove a point and have enough "economic" clout to do so.

As far as the RBNZ can control the exchange rate - they have few tools to do
this under the current legislative arrangements.  Any thing they want to do
outside OCR management has to be under Cullen's direction as current
treasurer - he is an academic with little, if any, commercial experience.  I
reiterate that this is currently the greatest challenge he faces (and the
first time that the current administration have had a problem - in economic
terms -  that they need to address).

In respect to how low can the US$ go - I was playing soccer the other day,
being a poor Kiwi and rugby player to boot, I was using my crystal ball.  I
made a fantastic strike at the goal and my crystal ball hit the cross-bar
and broke - as such it is difficult to say.  Notwithstanding that, I believe
(with all the stuff that USA is involved in globally that has cost but no
return) that the dollar will continue to track down for a while.

My guess for the NZ$ (and it is a guess - if it were any more Cullen would
surely offer me a job!!!) is that we will see continued appreciation to the
equivalent of about 76 cents US per 1$ NZ based on the exchange rate of
today.  Of course this gets complicated by the continuing fall in US$ -
perhaps it is a signal that benchmarking against that particular currency is
pure folly, I don't know as I am not an economist.

Unlike Cullen, I believe in the power of the market - any forms of
intervention to support a falling exchange rate will have longer term
adverse effects.  In my opinion (which admittingly doesn't count for much in
the scheme of things), current policy initiatives from the government of NZ
are more likely to limit growth than encourage it.  As such a drop in the
OCR would likely see a drop in the value of the NZ dollar, more stimulation
to the overall business environment, and a growth in productivity/GDP.  The
NZ political climate is too focused on the short-term, positioning for
re-election tends to commence as soon as the last election results were
announced.  Get government out of attempting to influence business and we
might see some economic growth - maintain the status quo and we will
continue to lose ground against those nations that we use as benchmarks.


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