Dollar hits five-month high on US jobs data, stress tests

Monday 11th May 2009

The New Zealand dollar rose to more than 60 US cents, reaching a five-month high as investors’ appetite for risk was stoked by better-than-expected US jobs data and after the so-called stress tests found the US banking system to be stronger than some investors had feared.

US non-farm payrolls fell by 539,000, according to the US Labor Department, less than the expected 590,000-600,000 predicted by economists, as the jobless rate surged to a 26-year high 8.9%.

Ten of the largest American banks will require around US$75 billion of capital, according the stress test results. The euro climbed 1.8% to US$1.3637 after it broke through its 200-day moving target on Monday in New York, a sign that demand may have dimmed for the greenback, the world’s reserve currency.

Since the euro broke through the moving average target, “people are excited and are talking about future bounces in risk currencies,” said Imre Speizer, currency strategist at Westpac Banking Corp. “The stress tests gave people cause for relief that the U.S. banks looks sort of sound.”

The kiwi rose to 60.28 US cents for from 59.31 cents on Friday in New York, and climbed to 59.52 yen from 59.01 yen. It slipped to 78.45 Australian cents from 78.59 cents last week, and dropped to 44.18 euro cents from 44.31 cents.

Speizer said the currency may trade between 59.70 US cents and 60.55 cents today with a bias for the topside of the range. He said the 60.55 cent level will be another important technical level, but that it’s too difficult to predict whether it will be a positive or negative week for the currency.

Australia unveils its budget tomorrow, and is expected to show a A$200 billion shortfall in revenue. Treasurer Wayne Swann will announce cuts in spending, and has blamed the previous administration for the deficit.

The Australian dollar gained to 78.45 US cents from 78.59 cents on Friday in New York.

The kiwi dollar may fall if the budget shows Australian economy, New Zealand’s biggest export market, is in dire straits, and investors extrapolate its problems across the Tasman, said Speizer.

Businesswire.co.nz

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