The Deputy Prime Minister and Finance Minister of New Zealand dismissed claims on Friday that his country is taking part in a global currency war, despite recent steps to temper strength in its domestic currency.
New Zealand's central bank governor told parliament on Wednesday that the bank had sold the New Zealand (Kiwi) dollar last month in an attempt to limit the sharp rise in the currency, the Financial Times reported.
This is the first time since 2007 the central bank has intervened in the forex market the report added. The Kiwi dollar is up 67 percent against the U.S. dollar since the beginning of 2009 and was trading at 0.8369 per dollar on Friday.
"New Zealand is not [in the middle of a currency war]," said Bill English, Deputy Prime Minister of New Zealand. "We have marginal ability to influence the [New Zealand] dollar through some peaks, the reserve banks can knock off some of the peaks...[but] we are not putting the public balance sheet at risk that others are taking in trying to affect their currency."
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English was referring to the policies implemented by countries such as Japan, where Prime Minister Shinzo Abe's plans to revive the economy through aggressive monetary policy, fiscal stimulus and structural reform has worked to depreciate the yen by 16 percent this year. On CNBC Asia's "Squawk Box," the New Zealand Deputy Prime Minister said he was unconvinced that 'Abenomics' would ultimately be effective.
"We are in the camp that is a bit skeptical about the effectiveness of 'Abenomics' and the other versions of that around the world. It might inflate asset prices for a while, and some of that has an impact on New Zealand... We can't influence it, so we don't react to it much," he added.
Expansive quantitative easing by governments in recent years, such as we have seen in the U.S. and now Japan can dampen currency strength, making those countries' exports more attractive and putting them at an advantage over other countries with stronger currencies.