Dollar little changed before weakening job market outlook

By Paul McBeth

Thursday 5th February 2009

The New Zealand dollar was little changed as traders await government figures that are expected to show a weakening job market and a rising unemployment rate.

Unemployment probably rose to a six-year high of 4.7% in the fourth quarter, according to a Reuters survey. The Household Labour Force Survey is released at 10:45am in Wellington. Last month ANZ National Bank chief economist Cameron Bagrie said the jobless rate "is going to 7%." A rising jobless rate helps underline the extent of the nation's recession, giving the central bank more room to lower interest rates further and weighing on the currency.

"If the number's worse than expected, we will see the kiwi fall lower than 50 US cents," said Imre Speizer, currency strategist at Westpac Banking Corp. "On the day, I would be a seller of the kiwi."

The kiwi rose to 50.74 US cents from 50.68 cents yesterday, and increased to 45.48 yen from 45.15 yen. It fell to 78.58 Australian cents from 78.95 cents yesterday, and was up to 39.53 euro cents from 39.10 cents.

Speizer said if the unemployment figures come in as expected, the kiwi may trade between 50 US cents and 51.50 cents. The rally in the currency that saw it push up to 51.50 cents "looks like it's over," he said.

Falling prices of raw materials are also weighing on the New Zealand dollar. The ANZ Commodity Price Index fell 4.3% in January, its sixth consecutive fall, led by wood pulp and milk powder. Weaker commodity prices lead to falling profits for exporters, dragging down demand and trimming sentiment for the currency.

The kiwi dollar was buoyed by ratings company Moody's Investor Services retaining its top sovereign rating of New Zealand's debt and an increased appetite for risk on data showing US service industries shrank at a slower pace than expected in January.

The Institute for Supply Management's index of non-manufacturing businesses, which makes up almost 90% of the US economy, rose to 42.9, below a reading of 50 that indicates a contraction, but ahead of expectations.

Comments from our readers

No comments yet