Kiwi at nine-month high as Fed extends QE, ties low rates to unemployment

The New Zealand dollar rose to a new nine-month high after the US Federal Reserve extended its quantitative easing programme and tied the end of record low interest rates to a targeted drop in unemployment.

The kiwi rose to 84.51 US cents from 83.90 cents at 5pm yesterday, the highest since it reached 84.71 cents on February 29. The trade-weighted index rose to 75.30 from 74.91.

The Fed will buy Treasuries outright at a rate of $US45 billion a month, alongside $US40 billion a month of mortgage-backed securities, according to a Fed statement after a two-day meeting of policymakers.

It will keep the target range for the federal funds rate at zero to 0.25 percent as long as the unemployment rate remains above 6.5 percent and inflation "between one and two years ahead is projected to be no more than" 2.5 percent.

The US jobless rate is now 7.9 percent.

"What has really got the market going is the thresholds for the lower rate commitment," says Imre Speizer, strategist at Westpac Banking Corp. If the jobless rate is slow to come down, rates would stay low for longer than the market expected.

The kiwi is now looking "over-bought" and may retrace back to 83 US cents in coming weeks before climbing back up above 84.70 cents, and "head towards a record high sometime in the first half of next year", he says.

Stocks rallied on Wall Street after the Fed's announcement that it will print more money. The Standard & Poor's 500 Index rose 0.6 percent.

The kiwi rose to 79.88 Australian cents from 79.69 cents yesterday and climbed to 70.29 yen from 69.32 yen. It was at 64.54 euro cents from 64.50 cents and rose to 52.24 British pence from 52.07 pence.

(BusinessDesk)


Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

Comments & Questions

Commenter icon key: Subscriber Verified

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7131 0.0012 0.17%
AUD 0.9574 0.0040 0.42%
EUR 0.6426 0.0028 0.44%
GBP 0.5362 0.0071 1.34%
HKD 5.5360 0.0129 0.23%
JPY 73.6660 0.4490 0.61%

Commods

Commodity Price Change Time
Gold Index 1320.6 1.800 2016-06-30T00:
Oil Brent 49.7 1.480 2016-06-30T00:
Oil Nymex 48.3 -1.510 2016-06-30T00:
Silver Index 18.6 0.220 2016-06-30T00:

Indices

Symbol Open High Last %
NZX 50 6897.5 6911.9 6897.5 0.09%
NASDAQ 4793.8 4843.1 4779.2 1.33%
DAX 9566.1 9695.6 9612.3 0.71%
DJI 17712.8 17930.6 17694.7 1.33%
FTSE 6360.1 6504.3 6360.1 2.27%
HKSE 20736.8 20828.0 20436.1 1.75%
NI225 15752.7 15781.7 15566.8 0.06%
ASX 5142.4 5247.6 5142.4 1.77%