Reserve Bank Governor Graeme Wheeler. Photo / Mark Mitchell
As well as neatly laying out his monetary dilemmas as governor of the Reserve Bank of New Zealand (RBNZ), Graeme Wheeler, in a speech last week confirmed the New Zealand dollar's reputation as the 'South Pacific peso'.
Among the developed market currencies, the Kiwi has been the third
strongest performing currency against the US dollar (after the Mexican peso and Swedish krona) over the past 12 months, Wheeler told the Institute of Directors in Auckland.
This, of course, has dire implications for the 'peso' tag, which was originally intended as a derogative indicator of currency weakness. And just as the tequila-soaked worm has turned, the entire global currency system has a topsy-turvy, drunken feeling to it right now with the 18 per cent over-valued NZ dollar (according to Wheeler) one of the minor hiccups.
The reasons for the currency upheavals have been well-documented but one of the major causes, as Wheeler reiterates, can be attributed to various types of quantitative easing [that] have added USD5 trillion of assets to central bank balance sheets over the past four years.
These policies, which seek to stimulate growth by 'printing money', have negative currency spillovers for attractive investment destinations such as New Zealand, he says in the speech.
