NZ dollar falls vs Aussie as stronger labour market stokes sentiment across the Tasman

The New Zealand dollar declined against the Aussie dollar after figures showed the Australian economy added more jobs than expected last month while the unemployment rate fell.

The kiwi dollar fell to 92.86 Australian cents, having touched 93.50 cents immediately before the jobs data was released, from 92.90 cents late yesterday. The local dollar traded at 69.28 US cents from 68.96 cents yesterday.

Australia's unemployment rate fell to 5.7 percent in April, while economists had expected no change at 5.9 percent, and the economy added 37,400 jobs or more than seven times expectations. Still, jobs growth came from part-time positions while full-time jobs fell, suggesting conditions aren't yet right for wage inflation or a rate hike by the central bank. While the Australian dollar gained after the data there was little change in swap rates, an indication the market didn't change its view on interest rates markedly today.

For the Reserve Bank of Australia, "the Holy Trinity is Australian housing, the unemployment rate and wages and their view is that wages have troughed," said Chris Weston, chief market strategist at IG Markets. "The unemployment rate being down 20 basis points did them some favours."

Still, the lack of reaction in swap rates indicated "this was a positioning play rather than a genuine economic driver or an increase in the probability of a tightening" by the RBA, he said.

The kiwi gained against the greenback as the Australian dollar rose. Also out about the same time as the Australian jobs figures was the ANZ-Roy Morgan NZ consumer confidence index, which rose 2.2 points to 123.9 in May, with the current conditions index gaining 4.6 points to 127.8 and the future conditions index edging up 0.4 of a point to 121.2. 

A net 17 percent of respondents expect New Zealand's economy to be in a good place in 12 months, up from 14 percent a month earlier, and a net 15 percent see better times over the next five years, unchanged from April, the survey showed. The survey respondents dialled back their inflation expectations, seeing an annual increase in consumer prices of 3.6 percent over the next two years, down from 4 percent in April, whereas house prices are seen rising 4.6 percent, down from 5.2 percent a month earlier.

The trade-weighted index increased to 75.06 from 74.86 yesterday. 

The kiwi increased to 62.17 euro cents from 62.09 cents. The local currency increased to 53.42 British pence from 53.32 pence yesterday and dropped to 77.01 yen from 77.60 yen. It rose to 4.7745 Chinese yuan from 4.7493 yuan yesterday. 

New Zealand's two-year swap rate was unchanged at 2.22 percent and 10-year swaps fell 4 basis points to 3.27 percent. 

(BusinessDesk)