Interest rates and the value of the New Zealand dollar will come under pressure after the Fed decided to not stop buying $US85 billion ($NZ101 billion) of treasury bonds each month. On Wednesday, $US85 billion converted to $NZ103 billion, such was the movement in the kiwi yesterday.
Buying the bonds supports the United States stock markets and global stocks, such as those in New Zealand and Australia, reap the benefit.
Both the New Zealand and Australian currencies rose on the news released at 6am yesterday. Markets around the world responded positively, with many pushing past recent highs.
The prospect of low US interest rates for longer should be a major relief to emerging markets which had been suffering from capital flight back to the developed world. Shares in Mexico and Brazil have already led the way higher.
Mr Speizer said the announcement, along with New Zealand's improving fundamentals, and a looming rise in interest rates by the Reserve Bank, should support the dollar at US84c to US86c during the months ahead.
It was likely the kiwi would fall against the Australian dollar should the Reserve Bank of Australia continue to ease interest down from the current 2.5% and the New Zealand central bank increase from its 2.5% official cash rate, he said.
Fed chairman Ben Bernanke refused to commit to begin reducing the bond purchases this year, and instead went out of his way to stress the programme was ''not on a preset course''. In June, he said the Fed expected to cut back before year end.
''There is no fixed calendar schedule. I really have to emphasise that,'' he told a news conference.
''If the data confirm our basic outlook, if we gain more confidence in that outlook . . . then we could move later this year.''
The reaction in markets was swift and sharp. The US dollar fell to a seven-month low against major currencies and the price of gold, a traditional inflation hedge, soared more than 4%.
Craigs Investment Partners broker Chris Timms said the three major US indices closed at record highs after the announcement. The Fed said unemployment remained elevated.
''Uncertainty over the strength of the economic recovery was underlined by the Fed's latest economic growth forecasts. It cut its forecasts for growth this year to between 2% and 2.3%, compared to the June estimate of between 2.4% and 2.6%.''
Mr Bernanke highlighted three reasons why policy makers decided to hold off scaling back bond purchasing. The were: the low labour force participation rate, drags on economic growth due to congressional wrangling over a looming budget deadline, and the recent rise in mortgage rates.
Mr Bernanke stressed asset purchases were not on a preset course and the central bank would continue to prop up the US economy for as long as it felt extra stimulus was needed, Mr Timms said.
The Fed chairman also expressed frustration at the looming congressional impasse on whether to raise the limit the US could borrow to pay down the nation's debt.
''The news of the delay in cutting back on the economic stimulus took many by surprise. The Fed's thinking reminds us the global recovery is fragile and we should remain cautious,'' he said.
Labour markets in key economies had not significantly improved and the outlook remained dependent on low interest rates and central bank support.
Interest rates, while likely to rise over the medium-term, could stay below historic averages for some time, Mr Timms said. In most markets around the world, equities continued to offer an attractive yield advantage over fixed income and bank deposits.
''While we expect this gap to close, for the time being investors are likely to remain focused on equities for income.''
