\n\tBy Andrew Nelson<\/p>\n
\n\tThere’s been increasing talk the Reserve Bank of New Zealand (RBNZ<\/span>) may line up the troops and ship them off to the Currency War. Foreign exchange analysts from the Commonwealth Bank note most of the speculation about the RBNZ<\/span> intervening to weaken the New Zealand dollar comes from three issues which have been playing out of late.<\/p>\n \n\tFirst, CBA<\/span> notes the rise in the NZD<\/span> trade-weighted index, which hit a new record high last Friday. Next is comments from the RBNZ’s<\/span> January policy meeting, with the central bank itself claiming the NZD<\/span> is overvalued.<\/p>\n \n\tThe last reason probably gives the biggest hint. CBA<\/span> notes the latest release of RBNZ<\/span> balance sheet data shows the central bank was a net seller of NZD<\/span> in December 2012. While still a relatively modest NZ$199bn<\/span>, the amount of selling is nonetheless increasing.<\/p>\n \n\tYet while the signs are there, CBA<\/span> doesn’t think the RBNZ<\/span> will overtly intervene to try and weaken the NZD<\/span>. What that means is that the analysts don’t see the RBNZ<\/span> doing anything in the public eye with the sole objective of influencing market conditions. It’s something that hasn’t been done since the GFC<\/span> and CBA<\/span> notes this is because of some stringent guidelines, which in the current circumstances have not been met.<\/p>\n \n\tThat doesn’t mean the RBNZ<\/span> won’t be out there trying to talk the Kiwi down and fiddling around with forex<\/span> reserve management. But were the RBNZ<\/span> to actually go the whole hog and overtly intervene in the forex<\/span> market, CBA<\/span> thinks the impact on the NZD<\/span> would not last long anyway. And again, were such a move made, CommBank<\/span> thinks it would only be as an “attempt to fire a warning shot” across the bow of the forex<\/span> market.<\/p>\n \n\tThis happened back in June 2007 following the RBNZ’s<\/span> move to intervene in the forex<\/span> market to sell the NZD<\/span>. Back then, the NZD<\/span> returned to levels prior to intervention within 10 trading days.
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