NZ dollar pares loss after RBNZ outlines risks to financial stability

Wednesday 13th November 2013

The New Zealand dollar pared losses earlier in the local trading session after investors digested the risks to the country's financial system posed in the latest Reserve Bank's financial stability report.

The kiwi dropped as low as 81.66 US cents after the report's release, and traded at 82.32 cents at 5pm in Wellington from 82.14 cents at 8am and 82.33 cents yesterday. The trade-weighted index was almost unchanged at 77.07 from 77.05 yesterday.

Central bank governor Graeme Wheeler told policymakers in Wellington a potential slowing of the Chinese economy is the biggest threat to New Zealand's financial system, as it would weigh on exports and the wider economy.

The Reserve Bank outlined what it sees as the biggest threats to financial stability, the biggest stemming from an elevated property market. The central bank last month imposed limits on how much low equity mortgages lenders can write, though said it was too early to assess the new policy's impact.

"The kiwi recovered after the initial move on the financial stability report," said Mike Jones, currency strategist at Bank of New Zealand in Wellington. "The market saw something it didn't like after it got the usual sensationalist headlines, but eased up once the economists read it."

Government figures tomorrow are expected to show the country's retail sales grew 0.9 percent in the third quarter, slowing from a pace of 1.7 percent in the June period, according to a Reuters poll.

The kiwi rose to 88.43 Australian cents from 88.15 cents yesterday after government figures showed annual wage growth of 2.7 percent in the September quarter, the smallest annual increase since March 2000.

The kiwi was little changed at 81.90 yen at 5pm in Wellington from 81.95 yen yesterday, and rose to 51.80 British pence from 51.50 pence. It fell to 61.23 euro cents from 61.43 cents yesterday.

BusinessDesk.co.nz

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