Kiwi dollar rises with US Fed plans

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Kiwi dollar rises with US Fed plans

3News NZ

US Federal Reserve Chairman Ben Bernank

US Federal Reserve Chairman Ben Bernank

By Tony Field

The New Zealand dollar has soared after the United States announced plans to print billions of dollars a month to boost its economy.

The kiwi hit 83 US cents, our stock market hit a four-year high, and global oil prices were up too.

Federal Reserve chairman Ben Bernanke calls it quantitative easing - but in plain language he really means printing money. Lots and lots of money.

And the move has cheered up American investors. Currency advisor Derek Rankin says creating all that new money weakens the US dollar and drives our currency higher.

“We are a matchbox in a washing machine in this situation, we can't do anything about it,” says Mr Rankin of Rankin Treasury.

The Fed hopes its actions will drive America's mortgage rates even lower - boosting the housing market and stocks. That should make people feel wealthier and encourage spending.

“They are more willing to go out and spend and that is going to provide the demand firms need in order to hire and invest,” says Mr Bernanke.

The kiwi is rising in value even though our biggest export market, Australia, is slowing down.

“We are probably going to stay in the 80s, the low now may be back towards 79, 80 around there - and the high might be up towards 85,”says Mr Rankin.

He says our dollar looks like staying higher, for longer.

Economists say our dollar is strong because compared to the rest of the world New Zealand simply looks like a safer place to invest.

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Comments

16/09/2012 11:42:25 p.m.

Isaac wrote:

Yes!!!! another step closer to complete Economic break down now perhaps we get to see the final collapse of the enslaving free market economy and get to watch the rich try to eat their money. Fraudulent, pyramid scheme gone forever. I can't wait to tell my children it's over perhaps we can call it independence day!

16/09/2012 5:51:58 p.m.

Mike wrote:

When was the last time the US had a trade surplus? How many decades ago?

The US has just borowed more and ignored their problems, as the EU is doing, as Labour wants here.

Till a country gets its spending under control a lower dollar wont lead to more exports and less imports, it just raises the import costs and makes the problem worse, lowers the standard of living, and creates inflation.

In a free market, a lower dollar can make exports more affordable and imports less affordable, but we dont have a free market with government involved.

One could do the same thing by taking a pay cut, and leaving the dollar alone. It too would lower costs, make exports cheaper and more affordable and imports comparitively less affrordable. We even have unemployed sitting around collecting welfare because our wages set too high. If we lowered the wages, it would also lower food costs as food prices is much based on labour costs. Lower wages would also feed through to cheaper housing, as cheaper wages would lower building costs, making properties cheaper, if we overcome the shortage of housing. Most countires too chickenshit to lower wages, hence chose the devalue/inflation instead.

16/09/2012 1:20:19 p.m.

Dan wrote:

I'm surprised by how little the posters below understand about economics. It is actually a good thing if import costs for the US rise and export costs decrease. Higher import prices will encourage more people to buy locally produced goods. Lower export costs will encourage more overseas countries to buy US products. Their trade surplus will therefore increase and that is a net gain. Furthermore, financial markets have improved since this was announced. Good job all round.

15/09/2012 8:00:43 a.m.

Mike wrote:

It may make them richer in US$, but in every other way they will be poorer.

And if you have a country that can't live within its means, devaluing wont fix the problem.

Its like the loony left keep making the basic argument that 1/1 < 2/2 < 3/3 argument for inflation here. Of course those same loonies claim revenue=profit, and that if you kill the golden goose, everyone will not go hungry ...

14/09/2012 11:38:35 p.m.

peter wrote:

bravo :) what a plan!!! the quickest way to be the richest country again by printing $$$...USA USA !!!

14/09/2012 11:27:07 p.m.

Mike wrote:

The cost of imports to the US will rise, their deficit will grow to new records, and the standard of living in the US will fall compared to other countries.

Basically the standard devaluation and inflation policy. The same devaluation and inflation piolicy some left loonies want here.

Our dollar is still weaker than almost all of our trading partners. US/Aus/UK/EU/Japan all have stronger currencies.

If go back far enough, NZ used to have a stronger dollar than the US, that was before we adopted the devalue and run huge inflation till our dollar was under 1/2 a US$.

14/09/2012 7:02:02 p.m.

TWE wrote:

And all that extra money printed out of thin air by the Fed will be lent to the government with interest, and the taxpayer will be paying for it with the Fed taking all the profit for essentially doing nothing. Criminals, liars and scum they are.