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NZ dollar headed for 0.5% weekly fall; US jobs data in focus

Friday 5th July 2019

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The New Zealand dollar is headed for a 0.5 percent weekly fall as markets wait to see if US jobs data bolsters the case for a steeper July rate cut from the Federal Reserve.

The kiwi was trading at 66.77 at 5:10pm versus 66.84 US cents at 7:55am and 67.17 cents late last Friday in New York. The trade-weighted index was at 72.92 versus 72.96.

Markets are expecting the US economy to have delivered 160,000 new jobs in June, following a 75,000 gain in May. The unemployment rate is expected to remain steady at 3.6 percent, which is a 50-year low. If the data is weaker, expectations for a 50-basis point rate cut at the Fed meeting this month will increase. Markets are currently pricing around a 30 percent chance of a 50-point cut and a 70 percent chance of a 25-point cut. A rate cut is fully priced in. 

Tim Kelleher, the head of institutional foreign exchange sales at Commonwealth Bank of Australia, said while things were quiet in the Asian trading day ahead of the data, the kiwi was under some pressure against the Aussie.

It was trading at 95.05 Australian cents from 95.13. The scrapping of a minimum 7 percent stress test for Australian bank loan applications, effective today, is adding to the stimulatory tools being deployed to revive the sluggish economy, Reuters said.

The move came after the Reserve Bank of Australia cut interest rates to 1 percent and the government passed A$158 billion worth of tax cuts.

The kiwi was at 53.08 British pence from 53.14. It was at 59.20 euro cents from 59.23, at 72.02 yen from 72.06, and at 4.5912 Chinese yuan from 4.5927.

The New Zealand two-year swap rate was at 1.2880 percent from 1.3001 late yesterday, while the 10-year swap rate was at 1.7030 percent from 1.7150 percent.


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