31 March 2005
The Reserve Bank today released the March 2005 issue of the Reserve Bank of New Zealand Bulletin.
In 2004, the Bank announced the findings of a comprehensive review of its policies on foreign exchange intervention. The first article discusses the issues around foreign exchange market dysfunction and the rationale for holding reserves. It sets out the framework that the Bank used to review the optimal level of reserves. Based on that framework, the Bank recommended that its intervention capacity for crisis management be increased to a minimum of $7 billion. This recommendation was accepted by the Minister of Finance in February 2004.
An additional outcome of the review was a recommendation that, as one of its monetary policy implementation tools, the Bank should have the capacity to intervene in the foreign exchange market to influence the level of the exchange rate. The second article describes the Bank's new intervention role, the guiding principles, and the implications for the management of the Bank's foreign exchange reserves.
The third article provides a brief overview of trends in the manufacturing sector over the past few years. An interesting finding is that strong domestic conditions appear to have bolstered sales for some manufacturers at a time when export revenues have been under some pressure.
The fourth article briefly outlines amendments to the rules involving disclosures by registered banks on a range of financial matters.
The March issue also includes a chronology of key economic and financial events during 2004. Those receiving a hard copy of the Bulletin will find a poster enclosed showing the path of the exchange rate over the last 20 years, to mark the 20th anniversary of the float of the New Zealand dollar earlier this month.
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