The Kiwi dollar gave up earlier gains, dropping to 73 cents to the greenback. Photo/File.
The New Zealand dollar gave up earlier gains as Federal Reserve chair Janet Yellen played a straight bat in her final policy review, keeping rates on hold while adding emphasis on plans to raise US interest rates.
The kiwi fell to 73.53 US cents as at 8am in Wellington from
as high as 74.19 cents overnight, and down from 73.77 cents yesterday. The trade-weighted index declined to 74.84 from 75.09 yesterday.
The Federal Open Market Committee was unanimous in keeping the federal funds rate in a range of 1.25 percent to 1.5 percent, with Yellen saying the central bank "expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate". Jerome Powell will take over the chair from Feb. 3 and be sworn on two days later. The greenback has been out of favour despite the prospect of higher US interest rates, but traders expect the world's reserve currency will attract buyers when rate differentials start favouring the US.
"There was a little bit about inflation but nothing to rock the market too much," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington. "There's been a little bit of relief for the US dollar."
Rudings said a lot of the greenback's recent weakness has been about market positioning, with some investors more enamoured with Europe's plans to wind back quantitative easing. Still, he said he expects the greenback will find support when US interest rates start rising, reversing the rate advantage in other countries. The yield on the 10-year US Treasury was at 2.73 percent, compared to 2.93 percent for New Zealand's 10-year government bond.
