The New Zealand dollar stalled, bunny-hopped and finally roared into action yesterday following much-anticipated news that the US Federal Reserve had cut interest rates by half a percentage point.
At 9 am, shortly after the announcement, the kiwi was trading at 44.29USc, unchanged from its opening price. But by the market's nominal 5 pm close it appeared investors had finally got into gear, pushing the unit to 44.62USc.
"It has been a very busy day actually," Bank of New Zealand foreign exchange manager Greg Ball said.
The market was quiet and nervy before the announcement, and took some time to react, but once it found its feet, the kiwi developed a "mind of its own," Mr Ball said, outpacing the aussie and the euro.
"The interest rate differential argument is coming back into play," he said.
Mr Ball said the rate cut had provided a "window of opportunity" for the kiwi between now and March.
"Our yields are going to stay quite a bit higher than our partners, the US and the aussie, and we will attract some capital flows into New Zealand as a result of that." He picked the kiwi to trade towards the 45USc level overnight.
Dealers expect attention to now shift to the Reserve Bank of Australia, which meets next week to discuss cutting rates.
- NZPA
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