At the same time, the forces pushing for interest rate rises here quietly gathered their strength.

The American action was widely expected following hawkish comments from the Fed chief Jerome Powell last month.

Describing the decision yesterday, a statement from the Fed blamed modest production growth, robust jobs growth, the pandemic, higher food and energy costs and the war in Ukraine for pushing prices upwards.

And a higher base interest rate was the answer to that problem.

Raised interest rates in the US usually attract investors who ditch other currencies in favour of the Greenback, to enjoy better American returns on their money. This causes other denominations to fall, including the Kiwi. 

“The New Zealand dollar has gone from around 70 US cents six months or so ago, to around 58 cents,” said the senior economist at ASB, Mark Smith.

The second impact would be on inflation here, due to the effect of the US rate on world money markets.

“New Zealand interest rates are more affected by global factors than by the OCR. Now we have seen two-year Treasury yields hit potentially15-year highs, following the Fed statement,” Smith said.

And that was not all.  

The Fed planned a series of further rate rises, which Smith said would add to pressure on the Reserve Bank here. For now, he was sticking with an OCR maximum of 4.25%, in contrast with comments from ANZ which favoured an endpoint of 4.75.

But Smith said there was a strong chance of a final figure that was higher than 4.25% but that was an upside risk, not a formal prediction.

Another worry was the danger that higher interest rates in the US would dampen global growth.   In some ways that would not be a bad thing for New Zealand exporters, because a lower New Zealand dollar would make goods cheaper abroad, and that would provide some insulation against falling world demand.

But the impact would not be all positive.

“What that will do is put increasing costs on firms that import from the US or buy goods from other countries that are paid for in US dollars,” Smith said.

“So the balance of conditions will be a weakened New Zealand dollar and higher interest rates.

“The US dollar is at a 20-year high, and the correction so far has been one-way.”

The slide in the New Zealand dollar against the Greenback that had continued for a week or so had slipped to just over US$ 0.58 by mid afternoon yesterday.