NZ dollar little changed as US election, RBA loom

Tuesday 6th November 2012

The New Zealand dollar was little changed ahead of the US presidential elections and a review of interest rates from the Reserve Bank of Australia that may narrow the gap with New Zealand rates.

The kiwi dollar traded at 82.44 US cents from 82.51 cents at 5pm in Wellington yesterday. The trade-weighted index was at 73.91 from 73.95.

In the US, the battle for the presidency remains too close to call. President Barack Obama pulled ahead of Mitt Romney in an Oct. 31 - November 3 national poll conducted by the Pew Research Center, favoured by 48 percent versus 45 percent, compared with a deadlock of 47 percent a week ago. In Australia, the central bank is expected to cut its cash rate to 3 percent from 3.25 percent.

The New Zealand dollar slipped to 79.55 Australian cents from 79.65 late yesterday.

"The key test for the cross will come from today's RBA meeting, which remains a close call," said Kymberly Martin, strategist at Bank of New Zealand. "If a cut is delivered it would likely see the NZD/AUD re-test September's 0.8060 highs. An 'on-hold' decision, however, could also prompt a significant reaction."

The first leg of this week's data on the labour market comes today with the labour cost index expected to show a quarterly gain of 0.5 percent, unchanged from three months earlier, for an annual pace of 2.1 percent. That's a precursor to Thursday's household labour force survey, which may show the economy added jobs while the unemployment rate fell to 6.7 percent from 6.8 percent.

"We are wary of some softer looking filled jobs and especially paid hours data from the Quarterly Employment Survey, following their strong readings in Q2," Martin said. "This may cause the market to increase RBNZ rate cut expectations as we head into Thursday's HLFS employment data."

The kiwi rose to 64.47 euro cents from 64.34 cents and rose to 51.62 British pence from 51.48 pence. The currency fell to 66.17 yen from 66.43 yen.

BusinessDesk.co.nz

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