10 Nov 2010

Dollar dips on Bollard's talk

9:42 pm on 10 November 2010

The dollar fell nearly a cent on Wednesday morning against its American counterpart after efforts by Reserve Bank governor Alan Bollard to talk down the currency.

Dr Bollard says the high currency is making it harder for the economy to achieve a much-needed boost in exports.

The dollar was already under pressure after concerns flared again overnight about possible defaults on European government debt.

Dr Bollard's comments drove the currency down further towards US77.5 cents. It closed at 77.6 on Wednesday.

He says the Reserve Bank could intervene directly in the currency markets to bring the currency down further.

But Dr Bollard has again expressed his discomfort at the prospect of having to take such action.

He says the central bank can intervene in the currency, but the efforts of the Japanese and the Swiss earlier this year show such intervention can have an initial effect but is rarely enduring if the main forces behind currency movements come from overseas.

The dollar has been trading around US79 cents in recent days, following actions by the United States Federal Reserve that weakened the greenback.