Bloomberg News

Bollard Says Rising Commodity Prices Bolster N.Z. Currency

June 29, 2011

(Updates with governor’s comment in second paragraph.)

June 30 (Bloomberg) -- New Zealand’s economy is being bolstered by high prices for its milk, meat and lumber exports, which are underpinning demand for the nation’s currency, central bank Governor Alan Bollard said.

“Rising commodity prices are improving export incomes but putting pressure on the exchange rate,” Bollard said in a statement on the Reserve Bank of New Zealand website.

The currency has gained 8.2 percent the past three months, the second-best performing G-10 currency after the Swiss franc. The higher exchange rate reduces the returns from exports, which make up 30 percent of the economy, and particularly overseas sales of manufactured goods that don’t benefit from commodity prices movements, Bollard said earlier this month.

The central bank was commenting after publishing its annual Statement of Intent, which outlines its priorities and focus over the next three years.

“We expect the New Zealand economy to be driven by continued growth in our East Asia and Australian trading partners,” Bollard said today. “High commodity prices have become an important engine of growth, but we expect price volatility will pose challenges for monetary policy.”

Rising oil and food prices, fanned by international political instability and global demand growth and supply disruptions, “are starting to cause significant inflation concerns,” he said.

--Editors: Garfield Reynolds, Tim Smith

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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