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NZ dollar gains as more-cautious Fed prompts clean-out of long greenback positions
Thu, 19th Mar 2015
FYI, this story is more than a year old

The New Zealand dollar gained after the Federal Reserve gave a more cautious assessment of the US economy, prompting traders who had been betting on further gains in the greenback to exit their positions.

The kiwi traded at 74.62 US cents at 5pm in Wellington, having risen as high as 75.45 US cents after the Fed's statement, from 73.03 cents late yesterday. The trade-weighted index increased to 78.21 from 77.22 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, dropped to a week low after the Federal Open Market Committee lowered its outlook for growth, inflation and interest rates, offsetting the impact of removing the key word 'patient' from its statement which signals it is prepared to raise rates based on future economic data. The statement was more dovish than some traders had expected and prompted a selloff in the greenback.

"It is very much a US dollar story and a positioning story today," said Alex Hill, head of corporate FX at NZ Forex. "The Fed was not going to be pleased about the appreciation their dollar so it tried to jawbone it a bit lower," he said. That prompted "an unwinding of long US positions."

Hill said the kiwi may trade in a range of 74.40 US cents to 76 cents in the next 24 hours and he "would be surprised to see it trade higher going into the weekend."

The kiwi didn't react much after figures showed the New Zealand economy grew 0.8 percent in the fourth quarter, meeting expectations.

The New Zealand dollar traded at 50.08 British pence from 49.46 pence yesterday. It rose to 96.42 Australian cents from 95.75 cents yesterday and gained to 89.83 yen from 88.61 yen. It rose to 69.21 euro cents from 68.84 cents.