NZ dollar TWI climbs to 14-month high as strong US jobs report stokes risk appetite

Monday 11th July 2016

The New Zealand dollar climbed to a 14-month high on a trade-weighted basis as a stronger than expected US jobs report stoked investors' appetite for risk-sensitive assets, boosting stock markets and commodity prices.

The trade-weighted index rose as high as 78 and was at 77.90 at 8am in Wellington from 77.59 last week. The kiwi was little changed at 72.92 US cents from 73.04 cents at the New York close on Friday, and up from 72.54 cents at 5pm in Wellington.

Stocks on Wall Street and in Europe rallied after US non-farm payrolls showed the world's biggest economy added 287,000 jobs last month, more than the 180,000 expected. Still, the data also reported higher unemployment and tepid wage growth, which some investors took to mean the Federal Reserve would delay raising interest rates. Commodities also rallied, with the Thompson Reuters CRB/CoreCommodity index up 0.8 percent, lifting demand for currencies sensitive to movements in raw material prices such as the kiwi and Australian dollars.

"This was seen as a goldilocks report, strong enough to suggest that the economy wasn’t falling into a hole but weak enough to suggest that the Fed wouldn’t be tightening anytime soon," Bank of New Zealand currency strategist Jason Wong said in a note. "The data set off a rally in risk assets and commodity currencies, while the market saw no reason to take the US dollar higher."

The local currency was little changed at 73.32 yen from 73.43 yen on Friday in New York after Japanese Prime Minister Shinzo Abe claimed victory in an election for the upper house of parliament, with exit polls indicating his coalition will increase its majority in the 121-seat house.

The kiwi fell to 96.29 Australian cents from 96.50 cents last week after Prime Minister Malcolm Turnbull declared victory in Australia's federal election, ending a week of uncertainty over the outcome in an unexpectedly close race.

The New Zealand dollar slipped to 4.8781 Chinese yuan from 4.8848 yuan last week as figures showed Chinese inflation was weaker than expected.

The local currency was little changed at 65.99 euro cents from 66.06 cents last week and traded at 56.27 British pence from 56.37 pence.

BusinessDesk.co.nz

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