FOREX-NZ dollar slammed by dovish cenbank, USD firm post-Fed

  • Reuters
  • Forex News
FOREX-NZ dollar slammed by dovish cenbank, USD firm post-Fed
Credit: © Reuters.

* Kiwi dollar worst performer among major currencies

* RBNZ opens door to possible rate cut

* Fed repeats "patient" stance on hikes

By Ian Chua

SYDNEY, Jan 29 (Reuters) - The New Zealand dollar slumped to four-year lows on Thursday as investors priced in a greater chance of rate cuts there, while U.S. dollar bulls focused on the positive in the Federal Reserve's latest policy statement.

The kiwi skidded to $0.7320 NZD=D4 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. ID:nL4N0V71O8

"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," JPMorgan analyst Sally Auld said.

The kiwi last stood at $0.7323, hovering at lows not seen since March 2011. Against the yen, it slid to its lowest levels in three months at 85.88 NZDJPY =R .

While the RBNZ was unambiguously dovish, the Fed had something for everyone. The hawks latched onto 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. ID:nL1N0V724L

Treasury yields fell to fresh lows and Fed funds futures rallied on the statement.

But the dollar held its ground against most of its peers. The euro, already under renewed pressure on worries about Greece, dipped to $1.1275 EUR/USD and toward an 11-year trough of $1.1098 set first thing this week.

Greece's newly installed leftist prime minister, Alexis Tsipras, challenged international creditors on Wednesday by halting privatisation plans agreed under the country's bailout deal, prompting a third day of heavy losses on financial markets. ID:nL6N0V71ND

The dollar also climbed against sterling GBP=D4 and reached a 5-1/2-year high on the Canadian dollar CAD/USD D4 . On the yen, the greenback eased to 117.45 USD/JPY , near the bottom-end of the prevailing 117.00-119.00 range.

All that left the dollar index .DXY slightly firmer at 94.665 and not far from an 11-year peak of 95.481 set on Friday.

Traders expect the major currencies to consolidate overnight moves, given the Asian calendar is bare of major economic data. ECONASIA

(Editing by Leslie Adler)

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