Kiwi heads for 1.7% weekly drop against AUD as jobs market deteriorates

The New Zealand dollar is headed for a 1.7% weekly decline against its Australian counterpart after the local labour market shows major signs of deterioration and  the Reserve Bank of Australia keeps interest rates on hold.

The kiwi traded at 78.30 Australian cents at 5pm in Wellington from 78.49 cents yesterday. It was at 81.61 US cents from 81.67 cents yesterday and is poised for a 1% weekly decline against the greenback.

New Zealand's currency underperformed its Australian counterpart this week after a 13-year high unemployment rate stoked bets the Reserve Bank will cut rates, while Australia's central bank kept its benchmark rate on hold.

Investors have previously rallied behind the kiwi on the expectation interest rate differentials will start moving in New Zealand's favour. The RBA today cut its growth forecast for 2013 to year-average GDP growth of 2.25% to 3.25% in 2013, down from its August estimate of 2.75% to 3.25%.

"We've seen a lot of the momentum taken out of the kiwi/Aussie cross over the last couple of weeks," says Dan Bell, currency strategist at HiFX in Auckland.

"Australia still has challenges and the RBA is more likely to cut rates over the next few months than the RBNZ", which means interest rate differentials should move back in the kiwi dollar's favour, he says.

Risk-sensitive currencies, such as the Australian and New Zealand dollars, have been under pressure this week as investors get nervous about the so-called "fiscal cliff' of $US600 billion of tax hikes and spending cuts for the US federal government.

That has put pressure on New York stock markets, with the Standard & Poor's 500 index ending its bull-run and dropping to a three-month low below 1400.

"The uncertainty looks at more risk aversion, which will be negative for the New Zealand against the US dollar," Mr Bell says.

Local data showed a pick-up in New Zealand house prices and sale volumes and an increase in retail spending on electronic cards.

The trade-weighted index fell to 72.98 from 73.11 yesterday, and is poised for a 1.1% weekly decline.

The kiwi dropped to 64.90 yen from 65.13 yen yesterday and declined to 63.87euro cents from 63.99 cents. It fell to 50.96 British pence from 51.07 pence yesterday.

(BusinessDesk)

This article is tagged with the following keywords. Find out more about My Tags

Comment & Question

Commenter icon key: Subscriber Verified

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7850 0.0000 0.00%
AUD 0.8924 0.0000 0.00%
EUR 0.6196 0.0000 0.00%
GBP 0.4880 0.0000 0.00%
HKD 6.0917 0.0000 0.00%
JPY 84.8970 0.0000 0.00%

Commods

Commodity Price Change Time
Gold Index 1231.3 -0.710 2014-10-24T00:
Oil Brent 86.1 -0.510 2014-10-24T00:
Oil Nymex 81.0 -1.020 2014-10-24T00:
Silver Index 17.1 0.024 2014-10-24T00:

Indices

Symbol Open High Last %
NZX 50 5292.8 5344.4 5341.7 -0.15%
NASDAQ 4459.5 4486.3 4452.8 0.69%
DAX 9008.6 9044.9 9047.3 -0.66%
DJI 16677.0 16811.7 16677.9 0.76%
FTSE 6419.1 6419.1 6419.1 -0.47%
HKSE 23311.9 23352.6 23333.2 -0.13%
NI225 15354.4 15377.0 15139.0 1.01%