NZ dollar surges after US interest rates cut

NZPA Wednesday December 17 2008 - 09:16am
The Federal Reserve's decision to cut United States interest rates more aggressively than expected sent the New Zealand dollar racing to a five-week high.

From around US56.40c about 8.20am, the kiwi rose as high as US57.90c within 20 minutes, before easing to be around US57.30c by 8.50am.

The Federal Reserve aggressively cut its target for overnight interest rates to a record low zero to 0.25 percent, and said it would employ "all available tools" to dispel a year-long recession.

The surprise move to lower its target for the benchmark federal funds rate by 0.75 percentage points to up to a full point from its prior 1 percent put the Fed in unprecedented policy territory. Financial markets had expected the Fed to lower rates by no more than three-quarters of a point.

The NZ dollar also briefly spiked to a two-week high above 51.60 yen.

Overnight the NZ dollar had climbed to a peak of US56.70c about 7.15am from US55.86c at 5pm yesterday.

ANZ bank said that despite a couple of false starts the NZ dollar managed to push higher overnight off the back of renewed US dollar weakness and position squaring. US economic data continued to paint a bleak picture with little relief in sight.

The kiwi was little changed against the Australian dollar at A83.53c at the local market open.

Against the euro, the NZ dollar edged up to 0.4095 at 8am from 0.4073 at yesterday's local close, while the kiwi also made a small gain on the yen, up to 50.91 from 50.57. The trade weighted index was 55.27 at 8am from 54.89 at 5pm.

Article from www.nbr.co.nz