Dollar surges after Fed sticks to rate hike track

The kiwi dollar rose to 70.24USc at 8am.

The dollar surged after the US Federal Reserve raised interest rates as expected but kept its track for further hikes unchanged, reiterating that it sees "gradual increases.”

The kiwi dollar rose to 70.24USc at 8am in Wellington, and earlier reached 70.39USc, from 69.31USc late yesterday. The trade-weighted index rose to 76.48 from 75.97.

The Fed raised the funds rate by a quarter point to a range of 0.75% to 1% and kept to its projection for two more increases this year, saying "gradual adjustments" will allow economic activity to grow "at a moderate pace.”

The US dollar fell to its lowest level in more than three weeks. Locally, traders are awaiting fourth-quarter gross domestic product, with a 0.7% rate forecast, a slowdown from the third quarter's 1.1% expansion.

"With the Fed statement and projections less hawkish than some feared, the USD major currency index fell after the announcement," Bank of New Zealand currency strategist Jason Wong says.

"We think the risks are weighted towards Q4 GDP coming in softer than market expectations. Any NZD dip on the result wouldn't be expected to be sustained, as the data are fairly dated. We still think the NZ economy is in good shape."

The pace of potentially market-moving events picks up through the week, with Dutch elections underway, statements due from the Bank of Japan, Bank of England and Swiss National Bank, and Australian labour market data.

The kiwi dollar rose to 65.68 euro c from 65.29 euro c and gained to 57.19 British pence from 57.02 pence. It slipped to 91.33Ac from 91.56Ac and rose to 4.8558 yuan from 4.7931 yuan. It traded at 79.72 yen from 79.60 yen yesterday.