By Paul McBeth
Thursday 6th November 2008
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The jobless rate probably rose to 4.3% in the third quarter, from 3.9%, according to the consensus in a Reuters survey. The participation rate probably eased to 68.3% from 68.6%. The currency may also decline on sliding global stock markets, which may continue into Asia today.
“The kiwi could get substantially weaker” on worse-than-expected jobs figures, said Michael Gordon, markets economist at Westpac Corp. “It could fall half a cent or more.”
The New Zealand dollar traded at 60.26 US cents, up from 59.82 cents yesterday. Gordon predicts it will trade between 59.50 and 60.80 US cents today. It rose to 59.53 yen from 59.28, and climbed to 87.06 Australian cents from 86.90 cents.
A weakening jobs market may herald a prolonged economic decline after stocks fell this year and finance companies failed or were forced to suspend payments to investors. The economy fell into recession for the first time since 1998 in the first half and may extend its contraction through to the end of the year.
Goldman Sachs JBWere economist Shamubeel Eaqub yesterday said the central bank may cut the official cash rate by a further 100 basis points in December, extending the steepest easing cycle since the OCR was introduced in 1999. Lower interest rates tend to sap demand for the kiwi dollar from investors who can borrow cheaply in yen.
The Dow Jones Industrial Average and the Standard & Poor’s 500 Index declined after figures showed a slump in the service sector in the US while the ADP Employment Index dropped. Stocks also fell on concern president-elect Barack Obama won’t be able to do enough to prevent a recession.
Soft UK manufacturing data and the prospects of interest rate cuts by the European Central Bank and the Bank of England weighed on European markets, with the FTSE 100 falling 2.3% and the German DAX 30 down 2.1%.
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