NZ dollar drops below 80 Australian cents

NZ dollar drops below 80 Australian cents in wake of growing jobless queue

By Paul McBeth

Aug. 6 (BusinessDesk) – The New Zealand dollar dropped below 80 Australian cents for the first time in 10 weeks after data showing a jump in unemployment stoked fears the economic recovery is faltering.

New Zealand’s unemployment rate surged to 6.8% in the June quarter, damping hopes of a speedy recovery after the worst recession in 18 years, and highlighting the divergence between the trans-Tasman nations. The kiwi sank against the U.S. dollar after the data release yesterday, but held near 73 U.S. cents as investors wait on American employment data that’s expected to show the world’s biggest economy shed more jobs last month. America’s jobless rate probably rose to 9.6% in July, and the softer growth outlook for the U.S. has investors betting the Federal Reserve will extend its quantitative easing programme when it meets next week.

“The outlook is what’s pushing things in the Aussie’s favour, with pretty weak data, including the Reserve Bank of New Zealand’s dovish statement,” said Imre Speizer, market strategist at Westpac Banking Corp. “After some rubbish data the kiwi’s quite resilient (against the greenback) – I’m amazed.”

The kiwi was little changed at 79.55 Australian cents from 79.54 cents yesterday, and edged up to 72.87 U.S. cents from 72.80 cents. It inched up to 67.19 on the trade-weighted index of major trading partners’ currencies from 67.16 yesterday, and dropped to 62.48 yen from 62.69 yen. It rose to 55.28 euro cents from 55.11 cents yesterday, and was little changed at 45.86 pence from 45.80 pence.

Speizer said the currency may trade between 72.50 U.S. cents and 73.20 cents today as investors tread water ahead of U.S. non-farm payrolls data.

The kiwi may extend its losses against the Australian dollar when the Reserve Bank of Australia releases its monetary policy statement, and investors will be looking to see any change in the regulator’s inflation outlook, Speizer said.

The European Central Bank and Bank of England held their respective benchmark interest rates yesterday, though ECB President Jean-Claude Trichet stressed the ongoing uncertainty about the region’s outlook.

(BusinessDesk)

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