Thursday 19th January 2017
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The New Zealand dollar saw its biggest one-day fall since November as the greenback strengthened sharply after a speech by the chair of the US Federal Reserve Janet Yellen, in which she said the world's largest economy was getting to the stage at which it could operate without the emergency support introduced since the global financial crisis in 2008.
The local currency fell to 71.38 US cents at 5 pm in Wellington, from 71.64 cents at 8 am and 72.04 cents late yesterday. A peak to trough loss of 1.3 percent today was the biggest fall in percentage terms since Nov. 9, Reuters reported. The trade-weighted index fell to 78.31 from 78.72.
The Federal Reserve slashed interest rates to near zero and introduced a policy of quantitative easing in response to the GFC, but has slowly been looking to wean the economy off the stimulus it introduced. In December last year, the Fed raised rates for the second time since the crisis, to a range of 0.5 to 0.75 percent.
Sheldon Slabbert, a sales trader at CMC Markets in Auckland, said the Federal Reserve was remaining quite hawkish in its attitude to interest rates.
"Janet Yellen talked this morning, we're still looking at probably two to three interest hikes, but I’m a little unconvinced at this point, four were promised last year, we only got one,” he said.
He added that markets were currently volatile, albeit within an established range of between 68 and 74 US cents.
"The market is also now realising we are heading into an uncertain time now," he said. "The US dollar was somewhat oversold in the short-term, we’re seeing a rebalancing on the kiwi."
The kiwi had soared against the US dollar on Tuesday as traders in America sold down the greenback on comments from President Trump that the world's reserve currency had got "too strong." Those gains were almost all unwound on Wednesday.
On a day in which the local currency was down against all the major currencies, it rose to 81.78 yen from 81.42 yen this time yesterday and dropped to 94.92 Australian cents, from 95.36 cents.
The kiwi continued to drop against the British pound, falling to 58.13 pence from 58.33 pence late yesterday. Against the euro, it fell to 67.11 euro cents from 67.32 cents.
It was down against the Chinese Yuan, dropping to 4.8940 yuan from 4.9391 Yuan.
New Zealand's two-year swap rate rose 3 basis points to 2.38 percent, while 10-year swaps rose 7 basis points to 3.41 percent.
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