WSJ:NZ Dollar Up Late, Buoyed By Fed Decision To Keep Rates Near Zero
Late Change
NZD/USD 0.8317 +0.0137
NZD/AUD 0.8061 -0.0008
NZD/JPY 63.985 +0.775
April 2013 Bond 2.955% +10.0 bps
May 2021 Bond 4.62% +17.0 bps
10-Year U.S. Spread +233 bps +21 bps
90-Day Bank Bill 2.87% +5.0 bps
WELLINGTON (Dow Jones)--The New Zealand dollar rose sharply after the U.S. Federal Reserve decided to keep interest rates low, although some of the gains were pared in Asian trading as the market awaited further trading cues from the U.S.
The U.S. dollar plunged earlier against major currencies including the New Zealand dollar after the U.S. Federal Reserve Open Market Committee said it plans to maintain rates at ultra-low levels until the middle of 2013.
ANZ senior dealer Alex Sinton said the Fed's intention to keep rates low gave the market "a green light to swing the bat" and start buying assets.
"Call it QE (quantitative easing) by stealth; call it state-sponsored private QE," Sinton said. "If the Tea Party won't let you do it, get the market to do it for you."
The New Zealand dollar reached a high of US$0.8413 during the session, but then moved lower as investors awaited further cues.
"People are waiting to see what U.S. equities do tonight. You might see a residual move higher in equities but then again, maybe not," said Westpac currency strategist Imre Speizer.
He added, however, that in the medium term he sees the Kiwi peaking around current levels or "perhaps a cent or two higher," before falling below the recent low of US$0.7968.
"Risk aversion hasn't gone away and the European debt crisis is still there," Speizer said.
Locally, the BNZ-Business purchasing managers' index is due out Thursday and may give the market some trading direction.
New Zealand government bond prices fell as market sentiment improved and the bonds followed offshore movement.
A local bond-trader said volume remained light during the day with some market participants tidying up positions.
"People are nervous so they have pulled their heads in a little bit," the trader said. "(The NZ dollar) is certainly not trading around a lot."
-By Lucy Craymer, Dow Jones Newswires; 64-4-471-5990; lucy.craymer@dowjones.com
