NZ dollar edges close to 80 US cents mark; bolstered by weak greenback, positive jobs data

Friday 5th November 2010

The New Zealand dollar continued to climb overnight, and outperformed all other currencies for a second straight day as an upside surprise in local job numbers and the weakening US dollar helped support the kiwi.

The greenback continued on its weakening trend after the US Federal Reserve announced a second round of quantitative easing yesterday, with the $600 billion asset purchase beating marketing expectations of around $500 billion. Global equity markets rallied on the news, with surging risk appetite increasing demand for growth currencies such and the kiwi and Australian dollars.

The currency was further bolster by positive third quarter employment numbers, with the Household Labour Force Survey showing a 1% increase in employment, double the 0.5% growth expected. This pushed the unemployment rate down to 6.4%, lower than the 6.7% market forecast.

“All currencies rose against the US dollar but the kiwi outperformed everyone, and did so by a good margin,” said Imre Speizer, markets strategist for Westpac. “The positive job numbers, which beat market expectations, were the thing that helped us outperform.”

The kiwi climbed to 79.42 US cents from 78.61 cents yesterday and advanced to 69.46 on the trade-weighted index of major trading partners’ currencies from 69.03. It rose to 64.08 yen from 62.55 yen yesterday, and gained to 78.29 Australian cents from 78.14 cents. It rose against the Euro to 55.94 euro cents from 55.62 cents, and increased to 48.80 pence from 48.71 pence yesterday.

On a trade weighted basis the kiwi dollar was “certainly not in the zone where Reserve Bank will consider intervening, with a few more cents to go before we move into the danger zone,” Speizer said. “If you look at the history of when they intervened - and that has only happened twice since the currency was floated - both occasions took place when the trade weighted index was above 72 cents.”

Speizer said the currency may trade between 78 US cents and 80 cents today as the market digests the impact of the Fed’s QE2.

Looking ahead into next week on the cross rates, Speizer said he expects the Euro to come under pressure, as investors shift their focus to European sovereign debt concerns now that the US quantitative easing announcement is under the belt.

Businesswire.co.nz

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