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NZ dollar flies to 6-1/2-mth high as Fed goes all out

14 September, 2012 - Reuters

SYDNEY/WELLINGTON, Sept 14 (Reuters) - The New Zealand dollar soared to a 6-1/2-month high on Friday after the U.S. Federal Reserve launched an open-ended stimulus campaign that boosted risk assets across the globe while giving a green light to sell the US currency.

  • The New Zealand dollar surged as far as $0.8325 in offshore trade, its highest since early March. It last trades at $0.8300.
  • Aussie powers up 0.7 pct to a one-month high of $1.0569, bringing its gains in the past six session to almost 4 percent. Last at $1.0540 and could be vulnerable to profit-taking given how far it has come.
  • The U.S. central bank pledged to buy $40 bln in MBS a month, or more, until the economy recovered properly and unemployment fell substantially.
  • That contrasts with the RBNZ on Thursday held interest rates at 2.5 percent and made no indication of a rate cut anytime soon.
  • The Fed's commitment to keeping rates super-low out to 2015 encouraged investors to use the U.S. dollar as a funding currency for carry trades, making the NZ and Aussie dollars particularly attractive for their relatively high yields.
  • The prospect that more stimulus will bolster the world's largest economy also cranks up risk demand to the detriment of the safe-haven currencies such as the U.S. dollar, yen and Swiss franc.
  • A stronger U.S. economy would also be a boost for commodities, with base metals and gold gaining overnight.
  • Aussie, kiwi rally across the board, pushing up towards multi-week highs versus the yen . Kiwi outperforms the Aussie , which sinks to around NZ$1.2655 according to Reuters data.
  • Kiwi holds around a key technical level of $0.8320, a peak hit previously in April. A significant break above that level will preserve upward momentum. Support seen around $0.8250, while offers suspected above $0.8350.
  • Kiwi on track to gain 2.5 percent this week, its best performance since June. It has made a clean break above its 55-weekly moving average, offering a bullish signal for the currency.
  • Some analysts see Aussie testing $1.0615 hit last month. A break above that would take the Aussie to its highest since March. Support seen around $1.0490/0500.
  • Australian government bonds rise on the view that more Fed easing will prompt demand for Aussie debt. The three-year contract indicated 0.030 points higher at 97.420, while the 10-year contract rises the same amount to 96.895.
  • New Zealand government bonds also rise, pushing yields 4 basis point lower across the curve.
  • (Australia and New Zealand bureaux)

    Copyright Thomson Reuters 2012. All rights reserved.

    The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

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