Thursday 14th March 2013
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The New Zealand dollar extended its slide against the Australian dollar after figures showed Australia's economy added eight times more jobs than forecast last month, dimming the prospects of a cut in interest rates across the Tasman.
The kiwi fell to 78.92 Australian cents from 79.33 cents before the figures were released and down from 80.01 cents before the Reserve Bank of New Zealand said interest rates would be on hold at a record low through 2013. That's the lowest level since Jan. 4.
Australian employment jumped by 71,500 in February, beating the forecast in a Reuters survey of just 9,000 and the biggest increase in more than 10 years, according to the Australian Bureau of Statistics. The jobless rate held unchanged at 5.4 percent against expectations of a rise to 5.5 percent.
Traders have been pricing in 22 basis points in cuts to Australia's 3 percent cash rate over the next 12 months though that's now likely to evaporate as a stronger labour market adds to signs economic growth is picking up pace.
The employment report "is going to shift a lot of people's impressions for the time being," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia. "We've had the view for quite a while now that it could well be it for the RBA. We were looking for signs of weakness in the data to make a rate cut a live probability and here we've got the opposition."
He said the employment data was volatile from month to month and looking at the three-month rolling average the increase wasn't as marked.
The strong Australian jobs report and dovish statement from the Reserve Bank of New Zealand suggest the cycles of monetary policy may not be as far out of step as has been assumed, with some economists saying the RBNZ's official cash rate could well be higher than the RBA's cash rate next year.
The Australian dollar jumped to US$1.0364 from US$1.0299 before the report was released.
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