NZ dollar heads for 1.9% weekly gain as US jobs report looms

Friday 4th March 2016

The New Zealand dollar is heading for a 1.9 percent gain against the greenback this week ahead of US employment data which investors will be watching to gauge whether the Federal Reserve will continue hiking interest rates this year.

The kiwi rose to 67.48 US cents at 5pm in Wellington from 66.25 cents on Friday in New York last week. It was little changed from 67.50 US cents at 8am and up from 66.72 cents yesterday. The local currency was broadly weaker against other currencies, including the the Australian dollar which was bolstered by better than expected economic growth in the December quarter, and the trade-weighted index is heading for a 0.8 percent weekly decline to 72.82 from 73.43 last week. The TWI was at 72.36 yesterday.

A BusinessDesk survey of nine currency advisers on Monday predicted the kiwi would trade between 64.50 US cents and 67.80 cents this week. Six expected a decline, two picked it to be neutral with a slight negative bias while one bet it would be flat. None expected a gain.

US non-farm payrolls figures on Friday in Washington are expected to show the world's biggest economy added 190,000 jobs last month, though investors are paying increasing focus on wage data which is seen as a bigger influence on inflation. The Fed will review policy later this month, and while the economic data has largely been upbeat, investors are still sceptical about the central bank's projected track for more rate hikes this year.

"The main focus is completely on what happens in the US with payrolls - it's expected to remain a reasonably strong pillar of the US economy, but we'll watch to see what the wage pressure information does," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "This is a US dollar move driving us (the kiwi) up - we're still of the expectation the US economy is doing reasonably well, but it's the US economy in charge of where the kiwi goes at the moment."

The local currency was a beneficiary of a pick-up in investor sentiment earlier this week, and piggy-backed on gains in the Australian dollar after a better-than-expected December gross domestic product report. The kiwi gained to 91.60 Australian cents from 91.38 cents yesterday after January retail sales data across the Tasman was just short of expectations.

The New Zealand dollar rose to 4.3973 Chinese yuan from 4.3660 yuan yesterday ahead of the National People's Congress this weekend, where China's policymakers will outline their policy plans for the year ahead.

The kiwi gained to 76.70 yen from 76.03 yen yesterday, and increased to 61.65 euro cents from 61.44 cents. It advanced to 47.67 British pence from 47.38 pence yesterday.

New Zealand's two-year swap rate increased two basis points to 2.43 percent and 10-year swaps edged up one basis point to 3.14 percent.

BusinessDesk.co.nz

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