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90 seconds at 9 am: Fed pledges 0% til late 2014 again, but doesn't talk about QE3; US$ rises and NZ$ falls; Dow up after US retail sales rise; Trade tensions with China growing
Here's my summary of the key news overnight in 90 seconds at 9 am, including news the US Federal Reserve has pledged again to keep its key interest rate near 0% until late 2014.
This would mean US short term interest rates would have been near 0% for 6 years by then. However, the US Federal Reserve's Open Markets Committee statement released around 7.15 am NZT failed to mention any suggestion of a third round of quantitative easing or money printing, which some in the market had been hoping for.
Instead, the central bank said the world's largest economy was expanding moderately and the labour market was improving.
This saw the US dollar strengthen and therefore the New Zealand dollar weaken initially vs the US dollar. The Kiwi fell to as low at 81.7 USc this morning after the Fed's statement from as high as 82.4 USc overnight, but it has firmed somewhat in mid-morning trade.
Unusually for the New Zealand dollar, it moved in a different direction to US stocks. The Dow was up as much as 1.4% in late trade, boosted by news of a JP Morgan dividend increase. See more here at Bloomberg.
Also, US retail sales rose 1.1% in February, which was in line with expectations and followed a revised-upwards 0.6% rise in January, again signalling US consumers appear to be regaining some confidence. This is crucial for the world's largest economy, given consumers are responsible for more than 60% of US GDP. See more Bloomberg.
Meanwhile, trade tensions are brewing on several fronts between China and the rest of the world.
The United States, the European Union and Japan filed a World Trade Organisation (WTO) action against China overnight over its ban on exports of rare earths, which are used in the production of flat screen televisions, hybrid cars and many other high tech devices. They argue China's ban increases world prices and breaches WTO rules. However, China says it is banning the exports for environmental reasons. See more here at BBC.
Barack Obama also announced overnight the creation of a special Trade Enforcement Unit to target breaches by China. This follows news yesterday that China had decided to stop the slow creep higher of its yuan currency. Many of China's trade partners accuse it of artificially suppressing its currency to boost its export sector. See more here at CNN.
Fighting back, China is protesting a European Union carbon levy on airlines flying to Europe. The levy of about 2 euros per passenger flying from China is designed to pay for carbon credits to offset carbon emissions on the flights. China raised the stakes this week when it suspended a deal to buy 16 billion euros worth of Airbus jets in retaliation. See more here at Reuters.