Reserve Bank Bulletin released
The Reserve Bank today released the September 2010 issue of the Reserve Bank of New Zealand Bulletin.
Our lead article shows how yield curves can help economists understand such events as the global financial crisis. The yield curve describes the relationship between interest rates and debts with different maturities, for example the differing returns on one, two- and five-year mortgages. The article discusses yield curves for government debt, bank securities and mortgage rates.
Our second article looks at the New Zealand dollar and the impact of the global financial crisis on our currency. The article identifies three key drivers of the exchange rate: interest rate differentials, commodity prices and investors' risk appetite.
The Reserve Bank has responsibilities under the new Anti-Money Laundering and Countering Financing of Terrorism Act from 2009. Our third article explains the regulatory and supervisory risk-based framework established by this Act and describes the Reserve Bank's supervisory approach.
Our final article describes the Reserve Bank's approach to managing the currency composition of its reserves portfolio. When reserves are fully hedged, foreign currency assets are matched with foreign currency liabilities, leaving little net foreign exchange rate risk. In July 2007, the Reserve Bank moved away from a fully-hedged reserve position, which made the currency composition of reserves a key decision.
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