The New Zealand dollar fell more than a cent today after the US Federal Reserve decided to lift its discount rate, a rate at which it lends emergency funds at, by 25 basis points to 0.75%.The move after US markets closed caught traders in the early Asian
The New Zealand dollar fell more than a cent today after the US Federal Reserve decided to lift its discount rate, a rate at which it lends emergency funds at, by 25 basis points to 0.75%.
The move after US markets closed caught traders in the early Asian time zone by surprise and made for a volatile session in New Zealand.
The NZ dollar was at 69.61USc at 5pm from 70.43USc at 8am and 70.05USc at 5pm yesterday.
"It caught the market off guard. The Fed took great pains to stress that it wasn't a policy tightening but the market begged to differ," said Mike Jones, currency strategist at BNZ.
The move was seen as a first step to more normal liquidity conditions in the US.
"It put a rocket under the US dollar and the NZ dollar went from 70.60USc to about 69.60USc and we've sort of bobbed around that level ever since," he said.
A comment by a Federal Reserve governor that the market's belief in a high probability of rate hikes in the US this year was overblown knocked the US dollar back slightly.
A speech by Reserve Bank of Australia governor Glenn Stevens warning that monetary policy could not stay expansionary as the Australian economy recovered was also noted on the day.
The NZ dollar was 78.10Ac at 5pm from 78.13Ac at the same time yesterday.
It was at €0.5161 from €0.5160 yesterday and at ¥63.82 from ¥63.68 yesterday.
The trade weighted index was 64.93 from 65.01.
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