The New Zealand dollar spiked 2.8c against the United States dollar yesterday within hours of the US Federal Reserve boldly cutting the target of its federal rate to boost lending to companies and consumers.
The US central bank rate target dropped yesterday from 1% to a new target range of 0%-0.25%, about 8am yesterday, seeing the kiwi bound up from US56.5c to US59.3c after midday, ASB economist Chris Tennent-Brown said.
"The focus is really back on the US economic problem now. It is causing people to reassess [the value of ] the US dollar," he said.
The kiwi remained weak against the euro and yen yesterday but at 84c against the Australian it was at "fair value", Mr Tennent-Brown said.
Gold made some slight gains on the international markets yesterday, rising to $US860, however, with more attention back on the US economy and downturn, oil lost ground and was being sold at below $US40 a barrel, prompting speculation of oil potentially selling for between $US20 to $US70 per barrel, depending on reactions to enforcement of pending Middle Eastern oil supply agreements.
Mr Tennent-Brown said the environment remained volatile and the kiwi could be expected to be "US5c either side" of yesterday's rate, between US56c-US62c because of trader fluctuations and the US entering its holiday period.
"The big question during the next 12 months is whether we [our kiwi] will resume the downward trend against the US dollar," he said.
AP reported from New York the US dollar sank to a fresh two-month low against the euro and a 13-year low versus the yen, a day after the Federal Reserve cut its rate to historic lows.
The 15-nation euro surged to $1.4349 in late New York trading.
