19 Mar 2009

Reserve Bank moves may be boosting dollar - expert

10:08 pm on 19 March 2009

A foreign exchange expert says the New Zealand's Reserve Bank could be helping to strengthen the currency.

The New Zealand dollar jumped 1.5 cents to US54.6c on Thursday morning after a shock move by the United States Federal Reserve. At 5pm, it was trading around US54c.

The Greenback fell against all currencies - including New Zealand's - after the

Federal Reserve announced it would start large-scale buying of government debt as part of an extra $US1 trillion injection into the ailing economy.

The Fed said said it would buy up to $US300 billion of longer term government debt over the next six months in the first operation on such a scale since the 1960s.

Derek Rankin, of foreign exchange specialists Rankin Treasury Advisory, says moves by the Reserve Bank in New Zealand to sell foreign currency reserves is also helping to keep the Kiwi dollar up.

Mr Rankin says the Reserve Bank amassed $5 billion in reserves in 2007 to help lower the value of the New Zealand dollar.

He says these are now being sold for Kiwi dollars and this is helping put upward pressure on the currency.

The Reserve Bank says it is banking on a lower dollar to get New Zealand out of recession by the middle of this year.