Read this : Abstract: We propose a novel theory of the impact of expected, non-secret, sterilized spot interventions on the microstructure of currency markets that focuses on their liquidity. We analyze the effectiveness of intervention operations in a model of sequential trading in which: i) a rational Central Bank faces a trade-off between policy motives and wealth-maximization, ii) currency dealers' sole objective is to provide immediacy at a cost while maintaining a driftless expected foreign currency position, and iii) adverse selection, inventory, signaling, and portfolio balance considerations are absent by construction. In this setting, and consistent with available empirical evidence, we find that the mere likelihood of a future intervention is sufficient to generate endogenous effects on exchange rate levels, to reduce exchange rate volatility, and to impact bid-ask spreads. Intuitively, in the presence of occasional intervention operations, currency dealers (whether monopolistic or perfectly competitive) revise their posted quotes at the beginning of every round of trading for a dual purpose: i) to elicit investors' order flow to take the other side of the potential government trade and ii) to simultaneously reduce its expected magnitude by pushing the exchange rate closer to the announced target level. Quote revisions are generally asymmetric, effectiveness of intervention is greater, and exchange rate volatility is lower under competitive dealership, since the lack of market power induces the dealers to pass any expected additional rent from potential intervention operations to the incoming investors. These effects are either exacerbated or assuaged depending on the extent of the Central Bank's policy trade-off, and either temporary or persistent depending on whether so is the threat of its future actions.
BUY BUY, the RBNZ has no money... - Too much money in goes to state social welfare, and the proposed state super scheme - If the BOJ cant win with intervention, how can little RBNZ
June 11 (Bloomberg) -- New Zealand's dollar slumped after the central bank sold its currency, saying a 19 percent gain in the past year wasn't merited by the economy's outlook. It was the first time the Reserve Bank of New Zealand has announced a sale using a NZ$7 billion ($5.3 billion) fund for stabilizing the currency. The exchange rate, which plunged from the strongest since it was set by the market in 1985, was ``unjustified,'' Governor Alan Bollard said in Wellington. Very kind of them to tell us how big their "currency stabilization" fund is...
Hi kiwi trader, how do you express yourself : we traders extract bucks from the trend...so let´s extract them !
They are selling their own currency and building reserves. Theoretically they have unlimited supply. It is nothing like the BoE in 1992 who were attempting to prop up their own currency with limited reserves. BTW the last time the kiwis came in they did it at pretty good levels. If the RBNZ's uses up the NZD 1.4bio set aside for intervention they can just get more through parliamentary appropriation. Merely an accounting change mate.
Westpac, one of New Zealandâs largest banks estimates that the central bank sold approximately NZD$120 million last night. They are moving the market with a lousy 120 Million bucks ??? Come on, that´s worth a laughter.... The Japanese are swallowing 120 Million for breakfast....even 1.4 billion....Buy NZD !