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NZ dollar range bound ahead of US jobs data

Friday 8th March 2019

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The New Zealand dollar was slightly higher but stuck to a very tight range ahead of US jobs data later in the global trading day.

The kiwi was trading unchanged at 67.58 US cents at 5pm in Wellington compared with 8am. It fell around 0.6 percent percent over the week. The trade weighted index was at 73.60 points from 73.55.

"The kiwi really struggled in the early hours and that was really just a US dollar strength story," says Mike Shirley, senior dealer at Kiwibank.  However, it bounced off a key technical support level of 67.45 US cents and got further impetus from some positive New Zealand data.

New Zealand's building activity rose more than expected in the December quarter as work on non-residential buildings drove volume growth. That, coupled with a better-than-expected economic survey of manufacturing meant ASB Bank revised its preliminary fourth quarter GDP forecast to 0.4 percent quarter-on-quarter versus a prior forecast of 0.2 percent.

TD Securities chief Asia-Pacific macro strategist Annette Beacher said markets are two-thirds priced for a Reserve Bank of New Zealand rate cut by November but "after adding up the building blocks for the December quarter GDP, that pricing appears "increasingly less justified."

Ever since the slight bounce off support and the data, "we have been in a mild recovery mode," said Shirley.  He added, however, the trading range was very tight. "The market is really just drifting along without its hand on the wheel, waiting for the next thing and that is probably going to be that non-farm payrolls number overnight," he said.

US non-farm payrolls likely increased by about 180,000 in February versus 304,000 in the prior month, according to economists surveyed by Bloomberg. The unemployment rate is tipped to come in at 3.9 percent.

Given the low unemployment rate, any sign of wage inflation could spur a market reaction, said Shirley.  "Good employees are harder to find, you have to pay more to get them, so it increases wages, which has an on-flow effect for inflation, which maybe then spurs the Federal Reserve to do something," he said. 

The kiwi was trading at 60.34 euro cents from 60.24 at 8am. It was at 51.61 British pence from 51.60, 75.27 yen from 75.38  and at 4.5398 Chinese yuan from  4.5375. It was at at 96.35 Australian cents from 96.20.

The two-year swap rate ended the day at 1.8135 percent from 1.8294 on Thursday and the 10-year was at 2.3725 percent from 2.4150.


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