NZ dollar falls as US wages grow faster than expected

Thursday 1st November 2018

The New Zealand dollar fell as stronger-than-expected US wage growth helped push US bond yields higher, making the greenback more attractive.

The kiwi declined to 65.20 US cents as at 8am in Wellington from 65.42 cents yesterday. The trade-weighted index slipped to 71.84 from 72.07.

The yield on US 10-year Treasuries rose 4 basis points to 3.15 percent after data showed private wages grew at a faster pace than expected in the third quarter. The US employment cost index precedes official non-farm payrolls data on Friday, with higher wages seen as a key component underpinning the Federal Reserve's plans to raise interest rates. The yield on 10-year US Treasuries is 59 basis points higher than its New Zealand equivalent, making the greenback more attractive for investors.

"The relative strength of the US economy, set against continued gradual slowing elsewhere, has helped support the USD," Bank of New Zealand interest rate strategist Nick Smyth said in a note.

Improved risk sentiment among investors also underpinned higher US yields and a stronger greenback. Stocks on Wall Street gained with the Dow Jones Industrial Average rising 1.8 percent in afternoon trading.

Smyth said the kiwi and Australian dollars underperformed among the 10 most-traded currencies. Australian inflation data yesterday was softer than expected, while business confidence in New Zealand remains sour. The local currency fell to 92.12 Australian cents from 92.31 cents yesterday.

Local data out this morning showed New Zealand property values rose at an annual pace of 5.4 percent in October. The 1 percent quarterly increase was the first in five months.

The kiwi declined to 4.5469 Chinese yuan from 4.5575 yuan. Chinese data yesterday showed softer manufacturing in the world's second-biggest economy.

The local currency fell to 73.68 yen from 74.06 yen after the Bank of Japan retained its ultra-loose monetary policy while concerns over the ongoing trade dispute between the US and China weigh on the world's third-biggest economy.

The New Zealand dollar traded at 57.59 euro cents from 57.67 cents yesterday and fell to 51.05 British pence from 51.49 pence.

(BusinessDesk)

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