The NZD was higher against the USD late Thursday, though below intraday highs, aided by the U.S. Federal Reserve’s announcement that it will keep interest rates exceptionally low until at least 2014. NZD rallied after the Fed’s statement as the safe-haven USD weakened due to a rise in risk appetite, and continued to push higher after the Reserve Bank of New Zealand kept its benchmark interest rates unchanged at 2.5%. The RBNZ’s rate decision left economists divided about whether the central bank had shifted from a tightening bias. While RBNZ Gov. Alan Bollard said it was prudent to keep the official cash rate unchanged amid uncertain global economic conditions and moderate strength of local demand, economists said Bollard didn’t offer a time frame for how long the rate would remain on hold, and some argued the bank now has a neutral bias.
However, the Fed’s plan to extend its low interest rate regime through to 2014 eclipsed concerns about the euro zone’s sovereign debt crisis, particularly the situation in Greece, where bondholders have yet to agree to a restructuring plan to make the country’s debt sustainable. To be seen how London markets will react to the dovish statement of the Fed. Traders will be closely watching the outcome of Greek debt-restructuring negotiations and the Italian bond auction tonight.
EasyForexNews Research Team