"We would not expect, given the strength of the flows, that intervention would materially change the level of the exchange rate, but we could take potentially the tops off rallies, " said Graeme Wheeler, governor of The Reserve Bank of New Zealand.
WSJ: Asian Governments Take Measures to Battle Strong Currencies
Enter the Reserve Bank of New Zealand, which has become the first authority to pass hard-and-fast rules for liquidity since the crisis.
The economy is probably in its fifth quarter of recession and the Royal Bank of Canada thinks the New Zealand central bank may have to resort to foreign-exchange intervention.
The Reserve Bank of New Zealand declined to comment.
WSJ: New Zealand, China in Talks on Convertibility of Currencies
An increasing number of central banks, such as the Bank of England, the European Central Bank and the Reserve Banks of Australia and New Zealand, now support the view that monetary policy should sometimes act to restrain a rapid increase in credit and asset prices.
ECONOMIST: Yesterday's financial architecture needs refurbishing
Also, on the other side of the world, the governments of Australia and New Zealand have announced a blanket guarantee of all bank deposits.
The finance minister, Michael Cullen, wanted New Zealand to follow the more relaxed strategy of Australia's central bank.
As well as lowering business costs, direct convertibility may pave the way for New Zealand's central bank to diversify some of its foreign-exchange assets into Chinese government bonds.
WSJ: New Zealand, China in Talks on Convertibility of Currencies
In New Zealand, the head of the central bank said the bank has intervened in currency markets to slow the appreciation of its currency, but admitted there was only so much it could do.
WSJ: Asian Governments Take Measures to Battle Strong Currencies
In nearby New Zealand, the head of the central bank said the bank has intervened in currency markets to slow the appreciation of its currency, but admitted there was only so much it could do.
WSJ: Asian Governments Take Measures to Battle Strong Currencies
In New Zealand, whose currency is a favorite trade of yen carry-traders, the central bank raised rates for the fourth time this year on Thursday, to 8.25, but signaled it was probably done with its tightening.
New Zealand's central bank said Wednesday it intervened in foreign-exchange markets to blunt the rise of its currency and will continue to do so, a day after Australia's central bank cut interest rates to a record low and noted the stubborn strength of the Australian dollar.
WSJ: Asian Governments Take Measures to Battle Strong Currencies
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