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NZ dollar falls on upbeat US jobs report; RBNZ survey may show waning inflation view

Monday 7th August 2017

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The New Zealand dollar fall after US jobs growth topped 200,000 for a second straight month while locally traders are looking ahead to the Reserve Bank's survey of expectations today, which may show views on inflation are waning.

The kiwi dollar traded at 73.98 US cents as at 8am in Wellington from 74.98 cents in New York on Friday and down from 74.28 cents in Asia at the end of last week. The trade-weighted index was little changed at 78.04.

The US dollar index rallied after Labor Department figures showed nonfarm payrolls rose by 209,000 jobs in July, beating estimates of a 180,000 gain, while average hourly earnings rose a modest 0.3 percent. US inflation data is released at the end of the week. Also helping the greenback were comments by National Economic Council director Gary Cohn in a Bloomberg interview that the US should cut the corporate tax rate to be in line with other major economies. The RBNZ survey today comes ahead of the monetary policy statement on Thursday, which is expected to project little if any increase in interest rates.

"The data confirmed solid momentum in the US economy and the price action would seem to suggest that the market may, in the short run, have overdone its current downbeat assessment of the US that has dominated recently," said Philip Borkin, senior economist at ANZ Bank New Zealand, in a note. "This week’s RBNZ statement will have dovish undertones, perhaps capping NZD/USD."

All 11 economists polled by Bloomberg expect the central bank to keep rates at a record low 1.75 percent at Thursday's review. In its May monetary policy statement, the central bank's forecasts indicated that rates would remain on hold until September 2019. Since then inflation and growth have been lower than the RBNZ expected and the New Zealand dollar is around 3 percent higher on a trade weighted index basis. Borkin said today's survey of expectations may show waning inflation expectations.

The kiwi fell to 93.29 Australian cents from 93.50 cents in New York on Friday. It dropped to 56.69 British pence from 56.81 pence and was at 4.9721 yuan from 4.9828 yuan. It dipped to 62.77 euro cents from 62.90 cents and traded at 81.87 yen from 81.98 yen.


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