The New Zealand dollar slumped to its lowest level against the greenback in five months today after United States Federal Reserve chairman Alan Greenspan made comments last night indicating US interest rates may soon rise.
At 5pm in Wellington the kiwi was buying US62.40c from US64.1c at 5pm yesterday, having traded between US62.17c, its lowest since mid-November last year, and US63.30c.
The Australian dollar was at US73.09c (US74.18c last night).
An ANZ Investment Bank dealer said the "main story in town" was the hawkish outlook for US rates
Last night in testimony to the senate banking committee, Mr Greenspan made upbeat comments along the lines that "deflation was no longer a risk" for the US economy, and as a result the greenback lifted across the board.
Economists now expect the Federal Reserve to hold its benchmark interest rate at 1 per cent in May, but the market was talking of a rise in August.
Consequently, " There's been an exiting of kiwi and aussie positions on the back of Greenspan's hawkish testimony," the dealer said.
"We've seen a lot of the high yielding currencies like the kiwi and aussie get sold heavily from the outset.
"We've bounced back now to around US62.40c with probably more risk to the downside."
More testimony tonight from Mr Greenspan would be eagerly awaited by the market, he said.
The US dollar was buying 108.79 yen (108.33) at 5pm, and the euro was at $1.1838 ($1.1966).
The kiwi also fell on the crosses today and at 5pm was buying A85.42c (A86.42c), 0.5275 euro (0.5357), 67.92 yen (69.44), 35.01 British pence (35.55), and 0.8199 Swiss francs (0.8312).
The trade-weighted index was at 63.48 (64.75), while the monetary conditions index was at plus 389 (487).
Ninety-day bank bill yields were at 5.60 per cent (5.58).
The February 2006 yields were at 5.61 per cent (5.56), July 2009s were at 5.94 per cent (5.87), and April 2013s were at 6.14 per cent (6.07).
- NZPA
<i>Currency:</i> Dollar slumps to 5 month low as Greenback bounces
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