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Forex - NZD/USD hits 1-month lows after RBNZ holds

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Investing.com -

Investing.com - The New Zealand dollar fell to one-month lows against the U.S. dollar on Thursday after the Reserve Bank of New Zealand left rates on hold, disappointing some market expectations for a rate hike.

NZD/USD hit 0.8152, the lowest since January 2 and was last down 0.72% to 0.8154.

The pair was likely to find support at 0.8116, the low of December 30 and resistance at 0.8217, the session high.

The RBNZ left the cash rate at a record low of 2.5% on Thursday, saying the country's "economic expansion has considerable momentum" and added that a return of interest rates to more normal levels can be expected "soon."

While the strong New Zealand dollar is keeping a lid on tradable inflation, "the bank does not believe the current level of the exchange rate is sustainable in the long-run," Reserve Bank Governor Graeme Wheeler said.

The announcement came after the Federal Reserve rolled back its bond purchasing program by another $10 billion to $65 billion-per-month, in a widely anticipated decision.

The Fed said growth signals are encouraging, and the unemployment market shows improvement "on balance".

Fears over emerging markets continued to weigh on risk appetite after rate hikes by central banks in Turkey and South Africa failed to prop up their currencies. Emerging market economies are vulnerable to reductions in Fed stimulus, as they rely on foreign investment to plug their current account gaps.

Market sentiment was also hit by renewed fears over a slowdown in China after revised data on Thursday showed that China's HSBC manufacturing index ticked down to a six-month low of 49.5 this month, below the preliminary estimate for 49.6.

The kiwi was lower against the yen, with NZD/JPY down 0.49% to 83.59 and was also weaker against the Australian dollar, with AUD/NZD climbing 0.62% to 1.0704.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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