US hike not likely to hurt markets

US interest rate rises may not weaken the NZ dollar. Photo / Brett Phibbs

The US Federal Reserve's first interest rate hike in almost a decade is unlikely to derail equity markets and further increases may not weaken the New Zealand dollar as much as Reserve Bank Governor Graeme Wheeler had hoped, say market analysts.

New Zealand's S&P/NZX 50 Index was up about 0.2 per cent in midday trading, having gained about 9 per cent this year. It reached a record high at the start of December.

The Kiwi dollar has been volatile since the Fed decision and subsequent media briefing by chair Janet Yellen and was trading at US67.54c from US67.79c immediately before the announcement. It has fallen 13 per cent this year. The trade-weighted index, down a more modest 7 per cent this year, was last at 73.53, or almost 4 per cent above the Reserve Bank's assumed average rate for the fourth quarter.

"If Graeme Wheeler was hoping for a Christmas present from the Fed decision, it has not eventuated," said Christian Hawkesby, head of fixed interest and economics at Harbour Asset Management.

"The Governor has been very open about wanting the Fed to finally get on with it and raise the fed funds rate, in the hope this would weaken the NZ dollar.

"The quickest route back to the goal for CPI inflation is to have a sharp depreciation in the currency," Hawkesby said.

The Fed's economic projections were largely unchanged from its September forecasts.