NZ dollar gains as traders digest weak US employment numbers

Monday 5th October 2015

The New Zealand dollar gained in local trading as investors weighed up the impact of weaker-than-expected US employment figures and what that means for the Federal Reserve's track to raise interest rates.

The kiwi traded at 64.65 US cents at 5pm in Wellington from 64.59 cents at 8am, up from 64.36 cents on Friday in New York. The trade-weighted index edged up to 70.26 from 70.16 last week.

Traders are weighing up whether the Fed will delay planned interest rate increases after Labor Department figures showed the world's biggest economy added 142,000 jobs last month, fewer than the 201,000 expected. At the same time, an improving outlook for global milk prices has eroded expectations New Zealand's Reserve Bank will have to cut rates as deeply as earlier feared, and traders will get another update at this week's GlobalDairyTrade auction on Tuesday in the US.

"There's not much chance the Fed will cut in October, and even the next one in December is looking less likely than what it was," said Michael Johnston, senior dealer at HiFX in Auckland. "The kiwi seems pretty well bid at the moment" with short-term selling opportunities if it pushes up to 65 US cents, he said.

Australia's Reserve Bank reviews monetary policy tomorrow and is expected to keep the target cash rate at 2 percent. The kiwi was little changed at 91.39 Australian cents from 91.28 cents last week.

New Zealand's two-year swap rate slipped 0.5 of a basis points to 3.66 percent at 5pm in Wellington and the 10-year swap decreased 1.75 basis points to 3.46 percent.

The local currency gained to 4.1091 Chinese yuan from 4.0919 yuan, with China currently celebrating the National Golden Week holiday. The kiwi rose to 77.61 yen from 77.21 yen last week, and traded at 57.55 euro cents from 57.42 cents. It was little changed at 42.47 British pence from 42.43 pence last week.

BusinessDesk.co.nz

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