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NZD/USD reverses and drops back to pre FOMC levels

FXStreet (Córdoba) - NZD/USD jumped after the decision of the Federal Reserve to leave rates unchanged and peaked during >Janet Yellen press conference at 0.6444 but then reversed and dropped a hundred pips from the highs.

The US dollar strengthened during the last minutes of the US session against commodity currencies and eared losses. NZD/UDS dropped back to 0.6340, less than 10 pips above the level it had before the FOMC statement.

The Fed decided to leave rates unchanged at 0 – 0.25% and wait for some further improvement in the labor market, to bolster its confidence that inflation will rise to 2% in the medium term in order to start the normalization of monetary policy.

According to the Societe Generale Research Team the decision was not a surprise to a market positioned that way but the tone of the statement and the new lowered ‘dot-path’ dragged US bond yields down. “That is not dollar-supportive. However, any bounce in risk assets will be short-lived. A dovish and dithering Fed inspires little confidence. Once EM inspired reduction in dollar long positions is over, we look for AUD, NZD and CAD to weaken again, with NZD the most vulnerable.”

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