Thursday, Jan 30th 2014: New Zealand Dollar rose slightly against the U.S. dollar during Asian trading tailing the decision of the Federal Reserve to shorten its cut for the monthly bond buying program by $10 billion. Another reason for the kiwi’s growth is the Reserve Bank of New Zealand’s decision to leave the cash rate at a low of 2.5%.
Meanwhile, a statement from the RBNZ was released mentioning economic expansion to have considerable momentum and the speculation of interest rates to be more normal “soon.” It said: “While headline inflation has been moderate, inflationary pressures are expected to increase over the next two years. In this environment, there is a need to return interest rates to more-normal levels.”
he euro however slipped after the monetary policy decisions of the U.S. Federal Reserve on Wednesday. The Fed, as expected, throttled their monthly bond purchases to support the economy. The European single currency that last cost 1.3662 U.S. dollars, is now down approximately at the same level prior to the decision. The European Central Bank (ECB) had previously the reference rate to 1.3608 (Tuesday: 1.3649) dollar fixed. The dollar cost thus 0.7349 (0.7327) EUR.
The volume of monthly bond purchases by the Fed to cranking the economy is decreased by 10 to 65 billion dollars. However, the same data was expected from the markets. The Fed moreover gave a thorough explanation for their decision for improving the economic situation and the labor market.
The decision by the Turkish central bank on Wednesday night had also led the interest rate to increase dramatically. After a rate hike by the South African Reserve Bank also impacting the markets, the emerging market currencies fell again under strong pressure.
The monetary policy decisions of the U.S. Federal Reserve had in the evening initially also no impact on the currencies of emerging countries. Throttling the flood of money is mentioned as one of the reasons for the problems of developing countries. The Fed did not mention the situation in emerging countries in their statement.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org