NZ dollar drops in NY trading after surge in US payrolls

Monday 8th August 2016

The New Zealand dollar fell in New York trading after figures showed the US economy stacked on thousands more jobs than expected last month, stoking talk that a Federal Reserve rate hike is still on the cards this year. US stocks and the greenback rallied.

The kiwi traded at 71.31 US cents as at 8:30am in Wellington, little changed from the New York close on Friday and down from 72.12 cents before the jobs data was released. The trade-weighted index was at 75.92, down from 76.39 before the payrolls data on Friday.

A US Labor Department report showed US payrolls rose by 255,000 in July, compared to economist expectations of 180,000, while figures for the previous two months were revised higher. The strong labour market indicators revived speculation the Federal Reserve will lift interest rates, a possibility that has been dialed back in the face of global uncertainties such as the Brexit. The Reserve Bank, by contrast, is expected to cut its benchmark rate on Aug. 11 and signal further easing.

"A surprisingly strong US payrolls report boosted US interest rates and the US dollar, as well as US equities," said Imre Speizer, senior market strategist at Westpac Banking Corp.

He said while the impact of the US payrolls data could linger, "the RBNZ’s easing cycle combined with the Fed tightening in December should push the NZD lower towards 69 US cents during the months ahead, although recent Bank of England and Bank of Japan easing have made the NZD even more attractive to global investment flows such that a test of 73 US cents is possible first."

The local dollar traded at 54.51 British pence, from 54.59 pence at the New York close on Friday. The kiwi traded at 93.61 Australian cents from 93.65 cents in late New York trading on Friday and rose to 72.74 yen from 72.59 yen. It was little changed at 64.33 euro cents and slipped to 4.7449 Chinese yuan from 4.7463 yuan.

(BusinessDesk)

BusinessDesk.co.nz

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