NZ dollar tips US78c after Fed move

Photo / Martin Sykes

The New Zealand dollar momentarily peaked above US78c for the first time in 29 months, after the Federal Reserve unveiled plans to buy US$600 billion in government bonds to help stimulate the United States economy.

The spike higher around 7.20am today was followed by a rapid plunge by the kiwi to around US77.20c, after which the NZ dollar rose again quickly to be at US77.85c at 8am, up from US77.08c at 5pm yesterday.

Today's Fed announcement followed the US mid-term elections - where a big swing saw the Republicans take control of the House of Representatives, although the Democrats were set to hang on to the Senate.

ANZ bank said it may take same time to digest the Fed decision and the US election result.

After a day in which it had the US77c handle comfortably in place, the NZ dollar had tried to push through the resistance zone between US77.40c and US77.60c during the overnight session, ANZ said.

Resistance levels continued to be tested and that should remain the trend while a broadly weaker US dollar theme continued.

"Only real fixes to the US unemployment and fiscal situation will assist a turnaround."

The NZ dollar was approaching a very long term resistance line at US78.20c, which should not be an easy hurdle to cross.

A slight improving tone in the global economic dataflow had continued overnight, which may point to signs of renewed momentum, ANZ said.

At the same time a widening in bond spreads in the eurozone peripheral economies, particularly Ireland, could be a sign that eurozone sovereign concerns could be back on the radar soon.

The kiwi made up some ground on the Australian dollar, buying A77.77c at 8am from A77.28c at 5pm, and also gained to 63.27 yen from 62.21.

Against the European currency, the NZ dollar was slightly higher at 0.5517 euros by 8am from 0.5501 at 5pm, while the trade weighted index rose to 68.49 from 67.98.

- NZPA