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Kiwi dollar firms on Fed comments, US jobs growth

Monday 7th January 2019

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The New Zealand dollar opened firmer after strong jobs data in the US helped calm rattled equity markets and offered an improved growth outlook for 2019.

The kiwi was trading at 67.40 US cents at 9am from 67.29 cents in New York Friday and 67.02 US cents at 5pm in Wellington last week. The trade weighted index was at 73.32 from 73.16 points here on Friday.

The kiwi firmed after December jobs growth in the US proved stronger than expected and after Federal Reserve chair Jerome Powell said the US central bank could be patient when assessing the need for further rate rises during 2019.

Mike Shirley, senior dealer with Kiwibank, said the kiwi initially came off after the very strong jobs data.

“It was the Powell comments that really gave it the lift,” he said.

US employers hired 312,000 workers last month, the most in 10 months and about 130,000 more than economists had expected. The November data was also revised up to 176,000 from the 155,000 originally reported. Average hourly earnings were also 3.2 percent higher than a year earlier.

That underlying strength, and the flexible approach signalled by Powell, saw the S&P 500 Index rise 3.4 percent, more than recouping its sharp losses the day before. The tech-heavy Nasdaq jumped 4.3 percent.

With no local data this week, Shirley said the focus is very much back on the major themes of 2018 – the global growth outlook, US-China relations and Britain’s on-going efforts to negotiate its departure from the European Union.

US and Chinese trade officials are due to meet in Beijing today for their sixth round of talks amid the two nations’ three-month truce on tariff hikes. Lawmakers in the UK are due to vote on Prime Minister Theresa May’s Brexit deal next week.

“The focus this week will be very much on what’s happening with the US-China trade talks,” Shirley said.

The kiwi remains susceptible to swings in global sentiment. While the Federal government shutdown in the US is unlikely to have much near-term impact, he said it may start to weigh on sentiment if it drags on for weeks and months as some suggest.

The New Zealand dollar fell to 94.59 Australian cents from 95.35 here late Friday. It eased to 52.91 British pence, from 53.02, and firmed to 59.07 euro cents from 58.83 cents. It rose to 73.10 yen, from 72.64, and firmed to 4.6231 Chinese yuan from 4.6004 yuan.

(BusinessDesk)

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