Kiwi tops US75c as weak US jobs data adds to greenback's woes

Thursday 7th October 2010

The New Zealand dollar rose above 75 US cents for the first time since October 2009 after weak American jobs data spurred speculation the Federal Reserve will print more money next month.

Investors' appetite for the greenback was sapped further after the ADP survey of private payrolls showed America unexpectedly shed jobs last month. The survey comes before the widely watched US non-farm payrolls report on Friday.

The yield on 10-year US Treasuries fell 7.6 basis points to 2.4% as investors bet the Fed will increase its asset purchase programme next month after several US central bankers threw their weight behind more quantitative easing.

Australian employment data today is expected to show the so-called ‘lucky country' added 20,000 jobs last month, and if that comes in as expected, the trans-Tasman currencies will probably hold on to their recent gains.

"ADP was poor again - it's never a great correlation with non-farm payrolls but the market has ‘bash the buck' as their mantra," said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

"The kiwi's as strong as 10 men - it drifted off in Asia yesterday, but was bought again in Europe."

The kiwi rose to 75.21 US cents from 74.92 cents yesterday, and gained to 67.02 on the trade-weighted index of major trading partners' currencies from 66.97. It increased to 62.35 yen from 62.25 yen yesterday, and was unchanged at 76.97 Australian cents. It slipped to 53.96 euro cents from 54.10 cents yesterday, and advanced to 47.32 pence from 47.04 pence.

Kelleher said the currency may trade between 75 US cents and 75.40 cents today, with American pay-rolls data on Friday the next key event.

Ireland had its credit rating downgraded one notch to A+ by Fitch Ratings, with the agency citing the bigger-than-expected bailout of the country's lenders as a leading cause. Ireland's fiscal deficit is forecast to blow out to 32% of gross domestic product this year.

The so-called currency wars fared up with US Treasury Secretary Tim Geithner complaining about several countries attempting to devalue their currencies. Though he didn't name any of the nations, he said the actions made it difficult to convince China to let the yuan appreciate.

Meanwhile, Chinese Premier Wen Jiabao told a business forum in Brussels to lay off pressuring the world's second biggest economy to strengthen its currency.

Businesswire.co.nz

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