NZ dollar extends decline ahead of key US job figures

Friday 7th October 2016

The New Zealand dollar extended its decline, trading near a two-month low, as looming US employment data keep the prospect of a rate hike by the Federal Reserve at the front of investors' minds.

The kiwi fell to 71.48 US cents at 8am in Wellington from 71.67 cents yesterday. The trade-weighted index was little changed at 76.46 from 76.44.

Economists predict the US added 172,000 jobs last month when non-farm payrolls data are released on Friday in Washington, and investors will be watching the figures for whether the labour market in the world's biggest economy is healthy enough to warrant another rate hike later this year. Fed officials have been relatively upbeat about the outlook in the US and economic indicators earlier this week exceeded expectations, prompting some traders to view a hike in November as an outside chance. The yield on 10-year US Treasuries rose 3 basis points to 1.74 percent.

"Expectations for a decent report already appear high, and the US OIS (overnight index swap) market now prices almost an 80 percent chance of a December Fed hike," Bank of New Zealand market strategist Kymberly Martin said in a note. "A stellar report would likely be required to spur a further leg of USD strength."

The European Central Bank noted "increasing scarcity of some bonds" in the account of its last policy meeting, though didn't directly mention tapering its quantitative easing programme, which has been rumoured as being under consideration. The kiwi rose to 64.13 euro cents from 63.99 cents yesterday.

The British pound dropped to a 31-year low against the greenback as investors adjusted to the prospect of the UK's prioritising immigration curbs over staying in the European single market when it exits the European Union. The kiwi rose to 56.67 pence from 56.32 pence yesterday.

The kiwi was little changed at 94.30 Australian cents from 94.22 cents yesterday, and gained to 74.40 yen from 74.12 yen. It fell to 4.7660 Chinese yuan from 4.7793 yuan yesterday.

BusinessDesk.co.nz

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