The US equities markets had been running hot until last Thursday when investors were spooked by reports of rising covid-19 infections in a number of large states including Florida, Texas and California. There has also been a fresh outbreak in Beijing where nearly 80 cases have been reported since Thursday.
Markets had been sagging over-night NZ time until the Fed's announcement but the S&P 500 futures were up 1.4 per cent a short time ago and the Dow Jones Industrial Average futures were up 1.8 per cent.
"The Fed had talked about how they were going to buy corporate bonds and overnight they confirmed it," said Pat Gilligan, a director at Forex. "A few people were a bit sceptical about the timing, but as long as they keep up these new initiatives," asset prices will continue to rise.
US politicians are also arguing not whether to provide more stimulus but about how much to provide.
Senate leader Mitch McConnell has talked about US$1 trillion but the White House wants US$2 trillion and the house Democrats have passed a bill that would cost about US$3 billion.
"As long as those sorts of measures keep coming out, that's going to keep risk sentiment on, but, as we saw on Thursday night, things can change quite quickly," Gilligan said
But some are worrying about the consequences of the US stimulus policies.
CNBC is reporting that Stephen Roach, one of the world's leading authorities on Asia and a senior fellow at Yale University, is forecasting that the massive US budget deficit is going to spark a US dollar crash.
"The US economy has been afflicted with some significant macro imbalances for a long time, namely a very low domestic savings rate and a chronic current account deficit," Roach, who is a former Morgan Stanley Asia chair, told CNBC.
He expects the greenback is going to fall about 35 per cent against other major currencies.
"These problems are going from bad to worse as we blow out the fiscal deficit in the years ahead," Roach said.
NZ also broke a 24-day streak without any new infections today when two cases were reported, two women who arrived from Britain and were allowed to drive from Auckland to Wellington after the sudden death of a parent.
The New Zealand dollar was trading at 93.23 Australian cents from 94.02 late yesterday, at 51.18 British pence from 51.25 pence, at 57.19 euro cents from 56.97 cents, at 69.69 yen from 68.67 yen and 4.5859 Chinese yuan from 4.5450 yuan.
The bid price on the two-year swap was at 0.2425 per cent from 0.2100 per cent, while the 10-year swap was at 0.7675 per cent from 0.7225 per cent yesterday.
