NZ dollar drops on weak US data, Aust. poll eyed

NZ dollar drops after weak US data, Australian election eyed

Aug. 20 (BusinessDesk) – The New Zealand fell against the greenback and the yen after U.S. reports showed rising jobless and weaker factory activity in the world’s biggest economy, weighing on stocks and sapping risk appetite.

U.S. unemployment claims unexpectedly rose by 12,000 to 500,000 last week, according to Labor Department figures while the Federal Reserve Bank of Philadelphia’s factory index sank to minus 7.7 in August, the lowest in more than a year, against expectations of a reading of 7. The data stoked concern that the U.S. economy is stalling. U.S. stocks fell, with the Standard & Poor’s 500 Index down 1.7%. Oil and other commodities fell. The kiwi dollar edged higher against its Australian counterpart ahead of this weekend’s federal elections, which may not deliver a clear outcome, hurting the Australian currency.

The kiwi dollar fell to 70.71 U.S. cents from 71.18 cents and weakened to 60.35 yen from 60.92. On a trade-weighted basis, the currency fell to 66.13 from 66.46 and it strengthened to 79.24 Australian cents from 79.07 cents. It fell to 55.16 euro cents from 55.52 cents and declined to 45.33 British pence from 45.53 pence.

The negative U.S. economic data has “knocked” the New Zealand dollar,” said Tim Kelleher, a vice president at Commonwealth Bank of Australia. He says the kiwi may traded in a range of 70.25 U.S. cents to 71 cents today.

U.S. jobless claims exceeded the 478,000 median forecast in a Bloomberg survey. President Barack Obama said the rising queue of unemployed underlined the need to cut tax for small businesses and assist them gain access to credit.

In Australia, the outcome of this weekend’s election is looking too close to call with Prime Minister Julia Gillard and opposition leader Tony Abbott potentially having to navigate a hung parliament, with the Greens holding the balance of power.

“A decisive result either way should see AUD outperform NZD early next week,” said Khoon Goh, senior markets economist at ANZ. “A hung parliament will most likely see the AUD get treated harshly.”

Locally, migration data is due out for July, which may show a continued net outflow that would signal less support for the domestic economy in the way of demand for housing and household items.

(BusinessDesk)

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