Bloomberg News

New Zealand’s Dollar Slips Versus U.S. Peer as Fed Extends Twist

June 20, 2012

The New Zealand dollar fell against its U.S. counterpart after the Federal Reserve extended its stimulus program and cut estimates for 2012 growth, reducing demand for assets linked to growth.

The Australian dollar declined earlier as the Fed said it would continue Operation Twist through the end of 2012 in an effort to fuel growth in the world’s largest economy. Some investors had speculated the central bank would engage in a third round of asset purchases known as quantitative easing, which may have boosted higher-yielding currencies.

The New Zealand dollar, nicknamed the kiwi, fell 0.3 percent to 79.62 U.S. cents yesterday in New York. It fell against all of its major counterparts except Japan’s currency, against which it gained 0.5 percent to 63.32 yen.

The Aussie erased a loss to gain 0.1 percent to $1.0194. It rose 0.8 percent to 81.08 yen.

The Fed expanded Operation Twist as policy makers lowered their outlook for growth and employment. The program seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio.

Continuing the program “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said yesterday in a statement at the end of a two-day meeting.

The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing from December 2008 through June 2011 to stimulate growth through lower borrowing costs. The Aussie appreciated 67 percent against the dollar during that time, and the kiwi climbed 56 percent.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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