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Dollar reaches six-week high

Wednesday 17th March 2010

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The New Zealand dollar rose to a six-week high after the Federal Reserve reiterated its pledge to keep interest rates low for an extended period in the world’s largest economy, stoking the appeal of higher-yielding currencies such as the kiwi.

The Federal Open Market Committee confirmed the Fed’s asset purchase scheme is slowly winding down, a signal that stimulus measures are being removed over time, while reiterating the central bank is in no hurry to raise its target rate from near zero.

The euro gained against the greenback after the statement, pushing the kiwi dollar just above a key level of 71 US cents. Helping buoy optimism for the global outlook, European nations agreed to extend emergency loans to Greece. The kiwi also gained against the Australian dollar after the Reserve Bank of Australia downplayed the prospects of further interest rate hikes.

Imre Speizer, senior markets strategist for Westpac Banking Corp., said there have been four attempts to push the kiwi through 71 cents since February.

“It’s now banging on the door - it’s definitely the key thing to be watching,” he said. A concerted break through 71 cents could see the local dollar rise further, possibly up to 72 cents, he said.

The New Zealand dollar traded recently at 71.15 US cents, from 70.42 cents late yesterday. It briefly touched 71.03 cents earlier. The currency rose to 77.22 Australian cents from 76.89 cents. The trade-weighted index, or TWI, rose to 65.28 from 64.98.The kiwi dollar fell to 46.53.

British pence from 46.73 pence and slipped to 63.48 yen from 64.06 yen.

The currency didn’t initially move much after the Westpac McDermott Miller Consumer Confidence survey for the first quarter showed confidence slipped to 114.7 from 116.9 on a scale where a reading above 100 means optimists outnumber pessimists.

European ministers have agreed to support Greece, ensuring emergency loans to help the nation avoid default. Greece’s credit rating outlook was revised by Standard and Poor’s, which removed the sovereign rating from CreditWatch negative, giving it a longer period of 18-24 months to resolve its fiscal woes.

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