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Thread: Predicting the exchange rate

  1. #1
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    Default Predicting the exchange rate

    On another thread recently I made a recommendation about moving money. If I had known the Reserve Bank was about to raise interest rates, I'd have made a different recommendation.

    Had there been hints from the Bank that they were going to raise rates, or did this come as a surprise? I don't follow the NZ media avidly, so I wouldn't be surprised if I'd missed something.

  2. #2
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    Yes, there were more than just hints that the rate was going to be increased. And note, it will continue to increase.
    There's not much to follow in the NZ media but it is probably recommended.

  3. #3
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    Quote Originally Posted by The Big Blob View Post
    Had there been hints from the Bank that they were going to raise rates, or did this come as a surprise? I don't follow the NZ media avidly, so I wouldn't be surprised if I'd missed something.
    As girlwithanewf said, there were more than hints. The banks have been saying, "They're doing it." "They're doing it soon." "They're probably doing it in March" for months now. Also, this is probably the first of several over the next few months.

    http://www.nzherald.co.nz/business/n...ectid=11219204

  4. #4
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    With increasing interest rates comes a stronger NZD currency (especially against the USD). I would not be surprised we hit $0.90 to the USD in 2 years time.

  5. #5
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    It's been on the cards for quite a while. Chairman Wheeler has been pretty clear about it. The RBNZ publish their expected track for short term interest rates and right now they expect to be ~5.25% by around March 2017. I'm not quite sure whether will get there (we'll be at $1/US$1 by then!) but rates are assuredly going up, and likely will continue aggressively. The US and UK will start raising rates as well soon (call it within a about a year) which will tamper the rise of the Kiwi but for now NZ stands ahead of the pack for rate rises in developed countries. The RBNZ are well aware that they can't manage the currency. Some NZ$100bn is traded every day, the 10th or so most traded currency. Not bad for a country of 4.4mm. So it's not that they don't care how high the currency goes because of the rate rises, they know they can't manipulate it like e.g.. the US with money printing or the Chinese. In the end it will be things like milk and log prices coming down (we're going gangbusters with exports to China) that will bring down the value of the Kiwi.

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