By Dan Bell
The NZD/USD opens at 0.8425 this morning, and hit a new 9-month high of 0.8459 overnight.
The US Federal Reserve declared early yesterday that they will keep rates near zero until the US unemployment rate falls to 6.5%, providing the rate of inflation remains low (which it is).
Given the current unemployment rate is 7.7%, US interest rates will not be rising anytime soon. The Fed also announced further monetary stimulus.
In effect, the USD printing presses will be running hot, which is likely to make it difficult for the USD to rise appreciably, and can weaken it further - NZD will remain at elevated levels in this scenario.
US House of Representatives Speaker John Boehner was quoted as saying that the White House is willing to “slow-walk our economy right up to – and over – the fiscal cliff.”
Japanese elections this weekend. The Opposition Liberal Democratic Party is expected to waltz in to power. The Bank of Japan is anticipated to ease monetary policy further post-election.
The NZDAUD traded above 0.8000 for the first time since early October.
World equity markets were lower across the board. The US indices dropped between 0.6% and 0.8%, and the UK and European indices fell 0.1% to 0.4% on the day.
Gold prices fell nearly 1% to USD$1694, and Copper prices dropped 0.7% to USD$8,074. Other metals prices were weaker.
The NZD opens at 0.8425 USD, 0.7970 AUD, 0.6450 EUR, 0.5205 GBP, & 69.15 JPY.
There is nothing scheduled on the domestic calendar today. Employment and Manufacturing Data will be released from Europe tonight, while US Inflation, Capacity Utilisation, and Industrial Production data hit the tapes afterwards.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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