NZ dollar hits month-low vs. Aussie dollar after upbeat Australian employment data

Friday 13th November 2015

The New Zealand dollar touched a month low against the Australian dollar after upbeat employment data across the Tasman pushed out expectations for an interest rate cut in Australia.

The kiwi slid as low as 91.50 Australian cents overnight, from 92.67 cents prior to the release of the data at 1:30pm New Zealand time yesterday afternoon. It was trading at 91.63 Australian cents at 8am in Wellington, from 91.72 cents at 5pm yesterday. The local currency weakened to 65.27 US cents from 65.57 cents yesterday as a slew of speeches from Federal Reserve officials kept alive the prospect of a US interest rate hike next month.

The Aussie dollar soared after a report showed the country had the biggest jobs gain in three-and-a-half years last month, while the unemployment rate dropped to a five-month low. That prompted traders to virtually price out the chance the Reserve Bank of Australia would cut interest rates in December, and reduced the probability of a move in February to around 28 percent, from 56 percent before the data, according to Reuters. That contrasts with New Zealand where most economists expect the central bank to reduce interest rates in December.

"The Australian dollar has been the star performer over the past 24 hours," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "The RBA will welcome these figures. Strengthening in the non-mining sectors of the economy is more than offsetting the drag from weakness in mining."

National Australia Bank, BNZ's parent, doesn't expect the RBA to reduce rates further, and expects the benchmark to remain at 2 percent "for an extended period", Martin said.

"The NZD/AUD plummeted as a consequence," Martin said. "Its sharp fall since the start of November, helped by the market reassessing its view of further RBA rate cuts, has taken the cross back within its fundamental ‘fair value’ range. We currently calculate this to be 0.9000-0.9300."

In New Zealand today, the Reserve Bank releases the latest monthly data on the amount of government bonds held by foreigners.

Tonight, the focus will be on the release of US advance retail sales data, and the University of Michigan consumer confidence survey.

The local currency weakened to 60.58 euro cents from 60.92 cents yesterday ahead of European trade and gross domestic product data tonight. It slipped to 42.89 British pence from 43.06 pence yesterday, declined to 80.13 yen from 80.58 yen, and fell to 4.1570 yuan from 4.1734 yuan. The trade-weighted index dropped to 71.16 from 71.35.

BusinessDesk.co.nz

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