Kiwi Falls As US Economy Admits It May Need Help

02 August 2012 03:00 - Lucy Williams

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Kiwi Falls As US Economy Admits It May Need Help

The US Federal Reserve kept its monetary policy unchanged while acknowledging that the country’s economy may need help as a result of decelerating economic activity. The US economy is the world’s largest developed economy so this is a worrying prospect. This news adversely affected the New Zealand dollar which fell to 80.87 US cents from 81.94 cents. The Fed is expecting growth to “remain moderate” over upcoming quarters. All focus is now on the European Central Bank meeting tonight which will announce its own monetary policy and rate decisions. There is speculation that the central bank will offer more aid to banks and dust off its bond purchase programme.

The New Zealand dollar did not show much of a reaction following the increase in prices by 3.5 percent in the Global Dairy Trade auction. The release of the ANZ Commodity Price Index should give traders a further idea about the prices of New Zealand’s major export commodities.  Despite recent declines for the New Zealand dollar the currency remains supported ahead of the European Central Bank meeting tonight. Economic recovery is becoming increasingly difficult not only due to a weakening US economy but business confidence levels continue to drop.

The Australian dollar is also down following the Federal Reserve meeting which failed to announce a fresh round of economic stimulus after economists had predicted a third round of quantitative easing.

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Related Links:
• US Federal Reserve
Official Website

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