Dollar follows other currencies down

The New Zealand dollar dropped to a three-week low against the greenback today as investors struggled to assess a Federal Reserve plan to boost a flagging United States economy.

At 5pm the NZ dollar was at US72.00c, down from US72.38c at 8am and US72.26c at 5pm yesterday. It traded as low as US71.85c during the local session.

The Fed said it will use proceeds from its investments in mortgage securities to buy longer-term government debt.

This was seen as a light form of a "quantitative easing" scheme to pump money into the economy. The Fed kept interest rates unchanged and offered a gloomy outlook on the US economy.

The downgrade to the economic outlook "is a problem for the (US) dollar in general," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey.

A local dealer said that after the Fed statement the US sharemarket oscillated and finished down 54, which didn't cause currency markets too much concern.

But many currencies, including the NZ dollar, fell as the day progressed.

The NZ dollar struggled with the US72c level once it fell below it but the Australian dollar also fell to be US90.76c at 5pm from US91.13c yesterday.

Investors were trying to assess the consequences of the Fed move and were wondering if currency markets could decouple from equity markets over time.

The NZ dollar was at A79.28c at 8am from A79.30c at 5pm yesterday.

The NZ dollar dipped to a three-week low 0.5456 euro overnight, but by 5pm was up to 0.5489, little changed from yesterday. It dropped against a strengthening yen to be 61.36 yen by 5pm from 62.02 yen yesterday.

The trade weighted index was 66.58 at 5pm from 66.78 yesterday.

- NZPA