The New Zealand dollar briefly dropped to its lowest level in more than a week before recovering after the Federal Reserve hiked interest rates as expected and projected another two hikes in 2018 and three in 2019.
The kiwi traded at 70.18 US cents as at 8:30am in Wellington, having dropped as low as 69.73 cents immediately after the Fed statement from 70.11 cents late yesterday. The trade-weighted index was little changed at 73.62.
The Federal Open Market Committee voted to lift the target range for the federal funds rate by 25 basis points to between 1.75 percent and 2 percent, removed some of the qualifiers from its assessment and raised its forecast for economic growth this year to 2.8 percent from 2.7 percent. It expects inflation will overshoot its 2 percent target this year - two years earlier than it has projected in March. The kiwi fell against the euro amid expectations the European Central Bank will continue to signal an end to quantitative easing in the regional economic bloc.
"The USD was weaker heading into this morning’s FOMC announcement but has recovered after a more hawkish statement was delivered," said Jason Wong, currency strategist at Bank of New Zealand, in a note. The market will now focus on the ECB announcement and President Mario Draghi’s press conference, he said. "The ECB is expected to take another inch forward with its policy messaging, this time indicating some next steps in considering the end of its quantitative easing programme."
In the Asia Pacific region today, traders will focus on May employment data in Australia and Chinese retail sales and industrial production figures. While tonight, UK retail sales, the ECB and US retail sales will come into focus.
The local currency traded at 59.53 euro cents from 59.70 cents yesterday and traded little changed at 52.47 British pence. It fell to 77.44 yen from 77.56 yen. The local currency traded at 92.60 Australian cents from 92.62 cents and fell to 4.4876 yuan from 4.4903 yuan.