NZ dollar falls on lower than expected economic growth

The dollar was around 0.1% higher against Japan’s yen, at Yen120.55.

“The mention of “monitoring developments abroad” hints at a concern with global conditions such as the Chinese stock market sell off played a significant part in the central bank holding rates”, said Alfonso Esparza, senior currency analyst at Oanda, in a note to clients released after the decision.

The dollar index, which measures the greenback against six major peers, was up 0.38 percent at 95.606 in late trading.

The New Zealand dollar spiked to a two-and-a-half week high after the Federal Reserve kept interest rates on hold, citing turmoil in global financial markets as threatening the world’s biggest economy, and lowering the track of future hikes.

Whole milk powder soared 20.6 percent to US$2,495 a tonne, stoking speculation that Fonterra Cooperative Group may revisit its forecast payout for the current season of $3.85 per kilogram of milk solids, a rate that’s below the cost of production for many farms and is expected to slow growth in the broader economy.

Some strategists believed the implications from the Fed’s updated forecasts and its policy statement were more hawkish than the market’s reaction would suggest.

Fed chair Janet Yellen citied worries about the slowdown in China as the reason why there wasn’t a rate rise this week but added that the U.S. economy continues to grow moderately and there will be increase before the end of the year.

The decision of the U.S. Federal Reserve to keep the rates unchanged at its existing record lows, led to some wild fluctuations in the Australian dollar.

The Fed’s rate call prompted weakness in the United States dollar, which flowed through into strength in the New Zealand dollar – which rallied by more than US1c – and to other currencies.

Others pointed to language in the central bank’s monetary policy statement suggesting the Fed is growing increasingly anxious about weakening growth overseas . The yen also edged up 120.12 to the dollar from Thursday’s low at 120.995.

The 10-year notes yield slipped to 2.192 percent from Wednesday’s 1 1/2-month high of 2.303 percent.

The December share price index futures contract was up 59 points at 5,166 points, with 21,137 contracts traded at 1220 AEST.

Boral swelled 1.77 per cent to $5.75 after reaching a settlement with the CFMEU to end a two-year black ban on the concrete supplier.