The New Zealand dollar fell below 70 US cents after the US Federal Reserve decided to hike the discount rate charged to banks for direct loans; in a sign that indicates that American regulators are moving toward winding down stimulus measures.

The NZ dollar was at US69.61c at 5pm from US70.43c at 8am and US70.05c at 5pm yesterday.

The move caught traders in the early Asian time zone by surprise after US markets closed, and stirred up things up in New Zealand.

“It caught the market off guard. The Fed took great pains to stress that it wasn't a policy tightening but the market begged to differ”, said Mike Jones, currency strategist at BNZ.

The move was seen as a first step to more normal liquidity conditions in the US.

Jones said, “It put a rocket under the US dollar and the NZ dollar went from US70.60c to about US69.60c and we've sort of bobbed around that level ever since".

The Dollar Index, a measure of the greenback against a basket of six currencies, climbed to its highest level since June- a 0.8 per cent jump to 81.05.

Imre Speizer, markets strategist at Westpac Banking Corp, said, "It points to the exit door quite explicitly - it's quite a powerful message".

"It puts the dampener on risk markets and we'd expect (U. S.) equities to get hammered tonight", he added.