Reserve Bank blew over $700 million trying in bring down dollar

Reserve Bank sold $702 million to force down Kiwi dollar – 06 Aug 2007 – NZ Herald: New Zealand Business and Personal Finance News

The figures are staggering!!!

The Reserve Bank has effectively burned up almost three quarters of a billion dollars in its futile attempts to bring down the dollar. Cullen and Bollard should resign immediately following these revelations.

Three quarters of a billion dollars wasted, this is nothing short of criminal waste. How many years of Herceptin would this have funded?

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  • Yes, well, they take the money (that they have sold via intervention) back either through currency swaps or through the daily open market operations by selling securities. It's a process called sterilisation, and used by central banks after intervention soas not to impact on interest rates. Not too sure exactly what the RBNZ did to sterilise the interventions, as some of it was swapped out and is now part of their reserve currency position. They will buy the NZD back at some point, but when the markets are keen sellers themselves, and this could well be years away yet, when the tables have turned and the RBNZ needs to support the NZD. That is why they have also changed the way they manage their offshore reserves.