Sharechat Logo

NZ dollar pares gains as looming RBNZ review takes sheen off jobs data

Wednesday 7th February 2018

Text too small?

The New Zealand dollar got a strong lift from positive jobs data but pared the gains late in the day ahead of tomorrow's Reserve Bank's monetary policy review when it may attempt to jawbone the currency lower. 

The kiwi rose as high as 73.45 US cents after government data showed a lower-than-expected unemployment rate, and traded at 73.07 US cents as at 5pm in Wellington, up from 72.63 cents in Asia yesterday. The trade-weighted index was little changed at 74.79 from 74.84 yesterday.

New Zealand markets were closed for the Waitangi Day holiday yesterday, avoiding much of the major market volatility of the past two days when stronger US jobs numbers stoked inflation expectations and eroded stock markets around the world. Things settled down and a resumption of risk appetite coincided with higher dairy prices at the GlobalDairyTrade auction, stoking demand for the kiwi.

The local currency got a further lift when Statistics New Zealand data showed the unemployment rate unexpectedly fell to 4.5 percent in the December quarter to the lowest level since the December 2008 quarter and below the 4.7 percent forecast in a Bloomberg poll of 12 economists.

"Risk aversion dissipated very quickly ... overseas markets turned around and said it's all good now," after a global sell-off earlier in the week, said Imre Speizer, senior market strategist at Westpac Banking Corp. Investors were cheered when the Dow Jones Industrial Average ended up 2.3 percent. "Then we had our good jobs data, which gave us another leg up," he said.

Speizer said the kiwi pared some of those gains late in the trading day, which could be due to concern that "tomorrow we may get a strong warning that the kiwi dollar is too high" from the central bank, as the trade-weighted index is around 2 percent above the RBNZ's projections. 

"I think they will to reinstate the currency warning and note that it is too high," he said.  If they do, it will hurt the kiwi "but I don't think it will be a major fallout." He said the monetary policy statement is likely to be a "non-event" against a volatile global backdrop. "It might sell off a little bit, but then move on." The central bank is widely expected to keep the official cash rate at a record low 1.75 percent and signal no rate rises on the immediate horizon. 

The local currency rose to 79.89 yen from 79.23 yen yesterday and gained to 92.68 Australian cents from 92.18 cents yesterday. It increased to 58.98 euro cents from 58.72 cents yesterday and rose to 52.34 British pence from 52.03 pence. The kiwi traded at 4.5698 Chinese yuan from 4.5648 yuan.

New Zealand's two-year swap rate fell 1 basis point versus Monday's closing level to 2.16 percent, while 10-year swaps fell 4 basis points to 3.27  percent.

(BusinessDesk)



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report