The New Zealand dollar pared some losses but remained near a four-year low on Thursday as investors priced in a greater chance of rate cuts there, while US dollar bulls focused on the positive in the Federal Reserve's latest policy statement. The kiwi had tumbled to $0.7314, its lowest level since March 2011, after the Reserve Bank of New Zealand opened the door to a possible cut in rates, having only last month flagged that further tightening was needed.
Traders said the move to a neutral stance was expected, but giving an allowance for rate cuts was not. "For the NZ dollar, a further repricing of RBNZ rate expectations will imply a period of under performance against the G10 crosses, especially given that a number of markets have already undergone a significant repricing of policy expectations in recent months," J.P. Morgan analyst Sally Auld said.
The kiwi regained some ground after hitting its four-year low and last traded at $0.7332. Against the yen, it last traded at 86.49 yen, up from a three-month low of 85.87 yen set earlier on Thursday. While the RBNZ was unambiguously dovish, the Fed had something for everyone. The hawks latched on to its upbeat outlook for the economy, while the doves interpreted a reference to global markets as suggesting it might delay any interest rate hike.
The Fed said it would take "financial and international developments" into account when determining when to raise rates, referring to global markets for the first time since January 2013. US Treasuries had rallied on Wednesday, with the 30-year Treasury yield setting a record low of 2.273 percent. The US 30-year bond yield last stood at 2.298 percent.
Overall, the Fed's current stance is a supportive factor for the dollar, especially at a time when currencies such as the euro have come under pressure, said Teppei Ino, analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore. The euro eased 0.1 percent to $1.1278. It had shed 0.8 percent on Wednesday, partly due to renewed concerns about Greece.
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