Ahead of the Fed's latest monetary policy decision, there had been some thoughts that, having made it clear it wasn't going to cut rates any further, it would indicate some timetable for rate hikes in the future, said Mitchell McIntyre, a dealer at XE.
"But there was none of that. They've indicated they're going to be on hold for some time," McIntyre said.
The Fed made it clear that it would need to see "a persistent and significant improvement in inflation" before it would hike rates, he said. "They're pretty strong words."
The Fed's dovishness inspired a surge of "risk on" and both the Australian and New Zealand dollars "just exploded," despite the outcome of Britain's general election hanging in the balance, McIntyre said.
Polling booths in Britain will close tomorrow at 11am, New Zealand time, and although Prime Minister Boris Johnson's Conservative Party has been leading in opinion polls, the race has been tightening, raising fears of a hung parliament.
The run-up in the domestic currency is also despite yet another looming deadline – the US is scheduled to slap tariffs on the remaining Chinese exports into the US on Dec. 15.
The latest word from Washington is that President Donald Trump is about to sit down with his top trade advisers to discuss whether or not to go ahead with those additional tariffs.
Global markets had been thinking at least a preliminary truce would be signed in the US-China trade war but that has appeared increasingly less likely as the tariffs deadline approaches.
The New Zealand dollar was at 95.63 Australian cents from 95.61, at 49.80 British pence from 49.85, at 59.09 euro cents from 59.17, at 71.47 yen from 71.40 yen and at 4.6286 Chinese yuan from 4.6249.
The two-year swap rate eased to a bid price of 1.1836 per cent from 1.2021 yesterday while 10-year swaps fell to 1.6225 per cent from 1.6500 per cent.
