Dollar holds above 71 US cents

Monday 5th October 2009

The New Zealand dollar held above 71 US cents after the US unemployment rate rose to a 26-year high and American companies shed more-than-expected jobs, stoking concern the global recovery will be slower than previously anticipated.

Wall Street stocks, metals and the US dollar fell after Labor Department data showed the world’s largest economy shed 263,000 jobs last month and the jobless rate rose to 9.8%, the highest level since 1983.

About 15 million Americans have lost their jobs since the start of the recession, and the new data suggests policy makers will need to keep interest rates lower for longer. US factory orders unexpectedly declined in August as demand for aircraft, construction machinery and electric equipment dwindled.

The data stoked speculation the Federal Reserve will be in no hurry to resume raising interest rates.

“Following the payrolls numbers, people are not expecting an immediate rate hike from the Fed,” said Philip Borkin, economist at ANZ National Bank, referring to the Federal Reserve. “The subdued report raises the question about the pace of the recovery.”

The kiwi rose to 71.58 US cents from 71.42 cents last week, and increased to 65.36 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.22.

It jumped to 64.23 yen from 63.79 yen last week, and climbed to 82.57 Australian cents from 82.43 cents. It was little changed at 49.09 euro cents from 49.05 cents last week.

Borkin said the currency may trade between 71.10 US cents and 72 cents today, and will probably have a quiet day with markets closed in China as people in the world’s fourth-largest economy continue to celebrate the 60th anniversary of the People’s Republic.

A holiday in New South Wales, Australia will also restrict liquidity in the kiwi, he said.

Finance ministers of the seven largest economies met in Istanbul over the weekend and reiterated the need for stable currency markets, saying “excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.”

US Treasury Secretary Timothy Geithner said a strong greenback is “very important” for the world’s largest economy and he told reporters the US will do everything necessary to maintain confidence in the currency.

Japanese Finance Minister Hirohisa Fujii told reporters his government will intervene in currency markets if the yen “moves in a biased direction.”

Businesswire.co.nz

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