NZ dollar gains as investors seek yield after US jobs data disappoints

Monday 7th April 2014

The New Zealand dollar popped above 86 US cents at the weekend after a key US jobs report failed to meet the expectations of some investors, spurring demand for higher-yielding currencies.

The kiwi touched a high of 86.03 US cents and traded at 85.81 cents at 8am in Wellington from 85.97 cents at the New York close and 85.59 cents at 5pm in Wellington on Friday. The trade-weighted index advanced to 80.22 from 80.14 on Friday.

The US dollar index, which measures the greenback against a basket of currencies, weakened after US non-farm payrolls missed expectations, with 192,000 jobs added in March, lower than the 200,000 predicted by economists and the 210,000 expected by some investors. The US unemployment rate held at 6.7 percent against expectations of a fall to 6.6 percent.

"The longer it takes for US data to recover and the longer US bond yields remain depressed, the more incentive there is for international investors to park cash here in New Zealand, with AAA rated five-year Kauri bonds trading at yields close to 5 percent, which is pretty good considering US five-year Treasury bonds trade at 1.7 percent," ANZ Bank head of markets research in New Zealand David Croy and senior foreign exchange strategist Sam Tuck said in a note.

"The bottom line: more disappointing data in the US is just piling more pressure on the New Zealand dollar," Croy and Tuck said.

ANZ expects the New Zealand dollar to trade between 85.50 US cents and 86.30 cents today.

The New Zealand dollar slipped to 92.35 Australian cents from 92.63 cents on Friday. It advanced to 62.67 euro cents from 62.43 cents on Friday, rose to 51.77 British pence from 51.60 cents and dropped to 88.59 yen from 88.93 yen.

Today, Chinese banks are closed for Tomb Sweeping Day.

BusinessDesk.co.nz

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