NZ dollar holds above 74 US cts on strong Aust employment

Friday 15th January 2010

The New Zealand dollar held above 74 U.S. cents after it surged up with its Australian counterpart following yesterday’s data showing unemployment unexpectedly fell to 5.5% last month.

Some 35,200 joined the Australian workforce in December, more than three times the expected 10,000, and helped boost sentiment for the trans-Tasman currencies which remained at their elevated levels.

A fall in U.S. retail spending last month along with comments from New York Federal Reserve President William Dudley helped damp demand for the greenback.

The Dollar Index, a measure of the greenback against a basket of six currencies, slipped 0.7% to 76.34.

The retail data and muted equity market activity on Wall Street “kept the commodity currencies up at their elevated levels,” said Imre Speizer, markets strategist at Westpac Banking Corp. “I was a little surprised the Aussie didn’t go further. Good news like that normally brings in buyers,” he said, referring to the Australian dollar, which failed to break through 93.30 U.S. cents.

The kiwi was unchanged at 74.24 U.S. cents, while the Australian dollar edged up to 93.08 cents from 93.03 cents yesterday.

The kiwi dropped to 67.47 yen from 68.19 yen yesterday, and declined to 66.85 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 66.97.

It gained to 51.17 euro cents from 51.13 cents yesterday, and decreased to 45.45 pence from 45.56 pence.

Speizer said the currency may trade between 73.70 U.S. cents and 74.40 cents today, and will probably spend more time threatening to break through the top of the range.

If it can get through that level, there shouldn’t be too much resistance for it to go to 75 cents, he said.

The kiwi tumbled below 80 Australian cents after yesterday’s employment data release, and recently traded at 79.70 Australian cents from 79.75 cents yesterday.

Westpac expects the New Zealand currency to gain against its closest neighbour in the coming months as the Reserve Bank of New Zealand begins hiking rates, and Speizer recommends buying the cross on dips.

The European Central Bank kept its benchmark interest rate at 1%, and President Jean Claude Trichet stressed the uncertain outlook for the Euro-zone, and said the recovery will likely be uneven.

New Zealand spending on electronic cards probably grew last month, when Statistics New Zealand releases data this morning, though Speizer said it’s unlikely to move the market unless it’s a massive number.

Foreign bond holdings out this afternoon will be worth watching, as they fell unexpectedly last month, and Speizer said it would be surprising if demand for New Zealand bonds was on the decline.

Businesswire.co.nz

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