Currency issues to be raised at APEC meeting: NZ PM

10:05, November 10, 2010      

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Tension caused by high exchange rates is likely to be a hot topic of discussion at the Asia- Pacific Economic Co-operation (APEC) leaders meeting in Japan this week, said New Zealand Prime Minister John Key on Tuesday.

He reiterated his position against moves in New Zealand toward controlling the exchange rate, despite other countries having gone down that path.

Key said the weakness of the United States economy and measures being taken there to depreciate the U.S. dollar was driving the high exchange rate in New Zealand, and it was an issue not unique to New Zealand.

Taking steps to control the exchange rate was an option for the Reserve Bank, but there were costs, he said, adding "those imbalances have to show up somewhere else in your economy -- either through more pressure on interest rates, higher inflation, less access to capital."

On the positive side, a higher exchange rate equated to lower fuel prices, no concerns about import inflation and little pressure for the Reserve Bank to lift interest rates.

Key said rising exchange rates were being felt widely and the issue was likely to be canvassed at APEC as it was at the recent East Asia Summit.

An obvious goal at APEC was to further the Trans-Pacific Partnership (TPP), which aims to integrate the economies of the Asia-Pacific region, he said.

Key also said the government believes the New Zealand dollar is over-valued against the U.S. currency - but there is little that can be done about it.

The dollar has been trading at about 79 U.S. cents in recent days, following actions by the United States Federal Reserve that have effectively weakened the U.S. currency.



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