Dollar gains after US employment data exceeds expectations

Monday 7th September 2009

The New Zealand dollar gained after the world’s largest economy shed fewer jobs than expected last month, boosting optimism the global downturn is past its worst and stoking investors’ appetites for higher-yielding, or riskier, assets.

The US economy cut 216,000 jobs in August, fewer than the 230,000 expected and down from the 276,000 loss in July, according to the Labor Department. Stocks on Wall Street rallied on the data release, with the Standard and Poor’s 500 climbing 1.3% on Friday, even as the unemployment rate rose to a 26-year high of 9.7%. Investors’ appetites for higher yields returned, and the Australian dollar benefited advancing 1.1% to a year-to-date high 85.06 US cents.

“Non-farm payrolls were the main event, coming in a little bit better than what people thought, equities had a pretty decent effort, and they bolstered risk appetites,” said Mike Jones, strategist at Bank of New Zealand. “The Aussie dollar was very strong and helped the kiwi rise higher,” he said referring to the trans-Tasman currencies by the colloquial names.

The kiwi dollar climbed to 68.81 US cents from 68.21 cents on Friday, and increased to 63.63 on the trade-weighted index, or TWI, a measure of the currency versus a basket of five trading partners, from 63.24. It rose to 63.97 yen from 63.33 yen on Friday, and advanced to 48.13 euro cents from 47.83 cents. It slipped to 80.84 Australian cents from 81.08 cents last week.

Jones said the currency may trade between 68.20 US cents and 69 cents today as it consolidates ahead of the Reserve Bank of New Zealand’s monetary policy statement on Thursday.

Economists predict central bank Governor Alan Bollard will hold the official cash rate at a record low 2.5% and reiterate his warning that rates will remain at or below current levels until late next year.

Group of 20 nations finance ministers, who met in London over the weekend, shied away from preparing exit strategies from their stimulatory measures and pledged to maintain their programmes aimed at battling the worst global recession since World War II. They also agreed to rein in bank bonuses and force lenders to hold more capital in reserve to prevent a repeat of the credit crunch of the past 18 months.

Businesswire.co.nz

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