It’s official. The RBNZ was selling its own currency.

The RBNZ announced yesterday that in the month of August it was an active seller of its own currency to the tune of more than half a billion dollars and this was the largest intervention made by the RBNZ in 7 years. The Kiwi Dollar weakened on the news but what sent it 1 cent lower within an hour was when New Zealand Prime Minister John Key spoke to the press. Mr Key a former large currency trader himself said the following to the press on Monday.

"I happen to actually support the view that the Governor has that the exchange rate is overvalued, so if they have intervened, it would be a matter for them, but it would seem fairly logical, I think at the level we’re at, [US]78 odd cents, we’re still at very high levels. In the end, the Goldilocks rate, not too high, not too low, just about right, I don’t know, [US]65 cents maybe, certainly ... lower than it is today.  Just because I think that’s the rate that works for exporters doesn’t mean it’s the rate it’s going to get to."

The RBNZ sold in August $521 Million of its Kiwi Dollar holdings but what is interesting is the fact that in the month that it did sell its own currency the Kiwi Dollar only dropped by 2c. The following month of September the Kiwi Dollar has dropped 6c. The intervention and comments made by the RBNZ simply goes to show that if you want to trade against a Central Banks views and intentions then you are likely going to be on the losing side of the market more often than not.