The New Zealand dollar rose after weaker-than-expected US economic data and as the Federal Reserve raised its key interest rate as expected and affirmed its track for a further hike this year.
The kiwi climbed to 72.70 US cents as at 8am in Wellington and earlier touched 73.19 cents, a four-month high, from 72.21 late yesterday. The trade-weighted index reached 78.33, the highest since early March, and was recently at 77.99 from 77.65 yesterday.
The Fed raised the fed funds rate to a range of 1 per cent to 1.25 per cent and reiterated that it saw one more hike this year. It also affirmed plans to begin trimming the size of its balance sheet, reducing holdings of bonds and other securities it had been hoovering up to provide the US economy with extraordinary levels of support. Ahead of the Fed statement, the US dollar had dropped after figures showed the biggest decline in retail sales in 16 months last month, while consumer prices unexpectedly fell.
"The US data was soft, and the Fed's tone was initially seen as dovish (on the idea that balance sheet trimming would supplant rate hikes)," said David Croy, senior rates strategist at ANZ Bank New Zealand.
"However, the NZD faces a test of its own today with GDP data, and it feels the risks are skewed to the downside given yesterday's current account miss on net exports."
