NZ dollar edges lower amid shrinking US services, American unemployment looms

Friday 4th December 2009

The New Zealand dollar edged lower after figures showing a shrinking service sector in the U.S. eroded investors’ appetite for higher yields, and a White House spokesman said unemployment may “tick upward.”

Risk appetites remained soft after the U.S. ISM non-manufacturing survey slipped back into contraction and raised concerns about the strength of recovery in the world’s largest economy. Investors are awaiting U.S. employment data out on Friday which is expected to show America shed a further 125,000 jobs last month, down from 190,000 in October. White House spokesman Robert Gibbs told reporters one estimate suggests the unemployment rate may “tick upward” from 10.2%, according to Reuters.

“Moves in currencies have been a bit lacklustre with people waiting for non-farm payrolls tonight – no-one’s prepared to put risk on the table,” said Mike Jones, strategist at Bank of New Zealand. “U.S. data reduced demand for the kiwi and Aussie on concerns about the U.S. recovery,” he said referring to the trans-Tasman currencies colloquially.

The kiwi dollar slipped to 72.52 U.S. cents from 72.66 cents yesterday, and was unchanged at 64.32 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners. It edged higher to 63.93 yen from 63.83 yen yesterday, and increased to 78.09 Australian cents from 77.99 cents. It climbed to 43.79 pence from 43.58 pence yesterday, and was little changed at 48.02 euro cents from 48.08 cents.

Jones said the currency may trade between 72.10 U.S. cents and 73 cents today, and may drift lower as risk appetite remains subdued. Still, a lot of speculative buyers like the kiwi “around these lows” as they look for bargains, he said.

The European Central Bank kept its benchmark interest rate at 1%, and President Jean-Claude Trichet announced the regulator’s first steps to begin unwinding extraordinary stimulus, scaling back some its liquidity measures. The kiwi dollar is finding support at its cross-rate against its Australian counterpart as investors look to Australia as a safe bet, Jones said.

“There’s demand for Aussie as some fund managers and real fund money accounts want to invest in Australia,” he said.

Earlier in the London and New York sessions, risk appetites had been stoked by news the Bank of America plans to pay back federal government funds from the Troubled Asset Relief Program, while retail sales in the Eurozone were better than expected.

Businesswire.co.nz

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