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The NZD has modestly underperformed the AUD rally as the June qtr average to date is “only” 8.5% above the March qtr average. The RBNZ clearly do not wish to preside over a stronger currency with such a fragile domestic economy, evident in many senior RBNZ members going on the record attempting to “talk down” the recent rapid rise in the currency. Last week the bi-annual Financial Stability Report
was released, and the Deputy Governor chose to talk down the currency during the press conference. Of interest, the FSR claimed that the banking sector needed to make more provision for bad debts, suggesting than further downside lies ahead for economic activity. Also last week, severe retrenchment in consumer spending.