14 Dec 2012

NZ dollar moves higher after Fed stimulus announcement

9:35 am on 14 December 2012

The New Zealand dollar rose to a nine month high after the US Federal Reserve announced further stimulus plans and changes to inflation control.

The kiwi reached US84.53 cents on Thursday after the Fed announced its proposal to extend its bond buying programme. The currency eased back on Friday morning.

The US central bank announced on Wednesday it would extend the programme by a further $US45 billion a month on an open-ended basis, with the expectation the additional purchases will continue to push long-term interest rates even lower.

The Fed wants interest rates to remain low until at least until after the country's unemployment rate falls to 6.5% from its current 7.7%. It previously had a date-driven rather than a data-driven target.

Analysts predict the New Zealand dollar will remain high, with some expecting the highs experienced in February to be exceeded before the end of the year.