New Zealand Dollar Gets Modest Boost From Upbeat Wheeler

Talking Points:

• The New Zealand Dollar firmed up against its US counterpart Wednesday
• The Reserve Bank of New Zealand’s stability review found domestic risks diminished
• Global uncertainty remains elevated, however, the RBNZ cautioned

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The New Zealand Dollar got a lift Wednesday after the RBNZ Governor said that risks to the domestic financial system had receded.

In the bank’s semi-annual Financial Stability Report, Graeme Wheeler said that the country’s financial system “remained sound” (not that anyone much thought otherwise before the fact of course), but that “global uncertainty remains elevated.”

Wheeler did worry about home owners’ “record amounts of debt” though, fretting that many might be left stretched were borrowing costs ever to rise quickly. However, he also noted that often-breakneck housing price growth had slowed, which pleased him.

Away from the housing sector, Wheeler said that a recovery in dairy prices had reduced financial risks to this crucial domestic sector.

His remarks saw the New Zealand Dollar rise a little against its US big brother. It drifted lower again as the Asia/Pacific session wore on but remained above where it was before the FSR was released. Mr. Wheeler went on to discuss the report before New Zealand’s Parliament on Wednesday, but that encounter added little to the report and didn’t move the kiwi.

The RBNZ disappointed some investors this month by remaining relatively dovish on interest rates despite some stronger local data. New Zealand’s interest rates are at record lows, and the central bank has suggested that monetary policy will remain accommodative for a considerable time based largely on the uncertain global picture.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX