N.Z. dollar not devalued last month

Press, 1 May 1981, Page 4

N.Z. dollar not devalued last month

PA Wellington For the first month since the flexible exchange rate system was introduced in mid-1979, the New Zealand dollar was not devalued last month.

Yesterday’s exchange rate statement by the Reserve bank said: “the level of the Reserve Bank exchange rate index stood at 90.1 at the end of April, unchanged from its level at the end of March. The index, which measures the value of the New 1 " Zealand dollar in terms of a basket of currencies of New Zealand’s main trading partners, has a base of 100 at the end of June. 1979." Previously, the dollar has been devalued every month from June, 1979. to March, 1981. and the monthly devaluations varied between 0.2 per cent and 0.9 per cent of the dollar’s June, 1979, value. Total mini-devaluations since June, 1979, have anounted to 9.9 per cent, while total mini-devaluations over the last 12 months have amounted to 5.9 per cent of

the dollar’s value at ttij corresponding time last year. Both these percentages ex* elude the 5 per cent devalua* tion made on Budget night* 1979. a week before the ex* change rate index was estab* lished.

The new flexible exchange rate system allows the Re* serve Bank to adjust the value of the dollar by a small amount each day, taking into account primarily the difference between New. Zealand’s inflation and the. inflation rates of its main trading partners. New Zealand's terms of trade are also taken into account. The adjustments up or down are not announced daily, but the Reserve Bank makes a monthly announce-' ment. ■

In a recent article the Governor of the Reserve Bank, Mr W. R.' R. White, said that the main aim of the system was to provide export growth by preventing exporters’ long-term profitability being eroded by domestic inflation. I