The New Zealand dollar dropped to a three-week low against the greenback but regained lost ground after the Federal Reserve unveiled plans to boost a flagging United States economy.At 8am the kiwi was buying US72.38c, a little higher than its level at 5pm
The New Zealand dollar dropped to a three-week low against the greenback but regained lost ground after the Federal Reserve unveiled plans to boost a flagging United States economy.
At 8am the kiwi was buying US72.38c, a little higher than its level at 5pm yesterday and well up from the low around US71.65c shortly after midnight.
BNZ markets strategist Mike Jones said that in the first part of the overnight session, growth sensitive currencies such as the NZ dollar were shunned by investors, as Asian stocks slipped, with the negative sentiment dragging European and US stocks lower in tandem.
But after the Fed's announcement the US dollar fell, while risk aversion eased as US equities pared earlier losses.
The Fed's move to reinvest money from maturing mortgage bonds into government debt marks an important policy shift for the Fed, which just months ago had been debating how to start winding up its various monetary stimulus programs. Fed officials also offered a more gloomy outlook on the US economy.
The downgrade to the economic outlook "is a problem for the (US) dollar in general," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey, while the move to invest in long-dated Treasury debt has pushed down US bond yields, making the US dollar less attractive to global investors.
The kiwi also fell to a three-month low around A79c about 6.30pm. By 8am it was back up to A79.31c, similar to its level at yesterday's local close.
ANZ bank said the cross had been unable to break out of the A79c zone, despite weaker Australian business confidence data yesterday, although the NZ dollar had dropped through key support at A79.28c.
Overall, demand for higher yielding currencies appeared to be a common theme, ANZ said, and it expected the NZ dollar to remain supported.
Digestion of the announcement from the Federal Reserve would be the task of Asia traders today.
The NZ dollar dipped to a three-week low 0.5456 euro, but by 8am was up to 0.5491, little changed from its 5pm level. Similarly the kiwi dropped to a three-week low around 61.65 yen, then recovered some ground to 61.78 yen by the local open, still below the 62.02 yen at 5pm.
The trade weighted index was 66.75 at 8am from 66.78 at 5pm.
