Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ dollar drops after Fed signals US economic recovery ahead

NZ dollar drops after Fed signals US economic recovery ahead, driving greenback demand

By Tina Morrison

March 20 (BusinessDesk) – The New Zealand dollar dropped almost three-quarters of a US cent after the Federal Reserve raised its projections for future US interest rates, signalling it sees recovery ahead for the world’s largest economy and spurring demand for the greenback.

The kiwi dropped to 85.51 US cents at 8am, from 86.21 cents immediately before the Fed’s 7am statement, and down from 86.10 cents at 5pm yesterday. The trade-weighted index fell to 80.07 from 80.22 yesterday.

The Fed, in its first meeting under new chair Janet Yellen, raised its projections for the future path of the Fed funds rate by 25 basis points to 1 percent by the end of 2015 and by 50 basis points to 2.25 percent by the end of 2016. It previously expected the rate to be 0.75 percent by the end of 2015 and 1.75 percent the following year. The move toward a more restrictive interest rate path ahead has turned investor attention to the attractiveness of US assets, and boosted demand for the US dollar.

“The increase in the expected path of rates, even though it’s a long way out, is above where the market was, and it’s encouraged the market to be betting on a US recovery,” said ANZ Bank senior FX strategist Sam Tuck. “By increasing those forecast projections, implicitly the Fed is forecasting the US economy to recover and rates to normalise faster than they were in December, which has driven the US dollar stronger.”

Still, Yellen stressed the Fed’s future track remained dependent on improving economic data, Tuck said.

Following its two-day meeting, the Fed pulled back its economic stimulus programme by US$10 billion, as expected. The Fed will buy US$55 billion of bonds in April, down from US$65 billion in March and US$85 billion in December.

Later today, the focus will turn to Philadelphia Fed Business Outlook Survey and US existing home sales.

In New Zealand today, traders are awaiting fourth quarter data for gross domestic product, scheduled for release at 10:45am. GDP probably rose 0.9 percent in the final three months of 2013, based on a Reuters survey of 11 economists.

The New Zealand dollar edged up to 94.47 Australian cents at 8am from 94.40 cents at 5pm yesterday.

The kiwi advanced to 87.61 yen from 87.21 yen yesterday, slipped to 51.70 British pence from 51.87 pence and was unchanged at 61.81 euro cents.

The New Zealand dollar fell to 5.2954 yuan from 5.3324 yuan yesterday in the first day of direct trading between the currencies.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news