8 May 2014

Any dollar move likely to be 'low key'

7:28 am on 8 May 2014

An economist says expects any intervention in the currency by the Reserve Bank will be relatively muted.

On Wednesday, Reserve Bank Governor Graeme Wheeler told a dairy conference the bank would consider intervening in the currency by selling New Zealand dollars if the kiwi remained high, even if economic conditions deteriorated.

The director of economics and strategy at First NZ Capital, Chris Green, said he thought Mr Wheeler would take a softly, softy approach if he did intervene.

Mr Green said the market was surprised by Mr Wheeler's comments, although the currency was tracking about 3 percent higher than the Reserve Bank had expected.

Mr Wheeler said the exchange rate was overvalued and the central bank did not believe its current level was sustainable.

He said if the currency did remain strong, that would affect the extent of and the speed at which he raised his official cash rate.

Mr Wheeler has already hiked the OCR twice this year, from 2.5 percent to 3 percent.