Latest Reserve Bank Bulletins released

Release date
17 December 2014

The Reserve Bank today released two Reserve Bank Bulletins.

One looks at how the Reserve Bank chose the designs for the next series of New Zealand banknotes. It takes readers through the design process, including the often intricate challenges of ensuring that the banknotes meet a variety of aesthetic, cultural and functional requirements. These requirements included security measures to prevent counterfeiting and compatibility with banknote processing equipment, such as ATMs. The first two denominations from the new banknote series will be released from October 2015.

The other looks at the new methodology for the Reserve Bank's trade-weighted index (TWI) measure of the exchange rate. The TWI measures the New Zealand dollar's value against a basket of other currencies. From today, the number of currencies included in the basket has been increased from five to 17. The weight given to each currency is now also based solely on the level of trade undertaken by the country concerned with New Zealand. Previously, the weights were partly based on the relative importance of each economy's GDP. The article explains why these changes were made, and also discusses the methodologies used in some other measures of New Zealand's effective exchange rate.

The new TWI has increased by materially less than the old TWI over the last decade or so. That reflects the substantial weight given to the Chinese yuan in the new TWI, against which the New Zealand dollar has not appreciated at all. It also reflects the much lower weights now given to the currencies of the major advanced economies; the United States, the Euro zone, and Japan.

"Despite the TWI-17 being different than the TWI-5, the changes don't materially alter our judgement about the exchange rate being unjustifiable and unsustainable," Assistant Governor John McDermott said.

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Media contact:

Angus Barclay, External Communications Adviser

Phone 04 471 3698, mobile 027 337 1102, angus.barclay@rbnz.govt.nz