Kiwi gains after downbeat US employment data

Monday 11th October 2010

The New Zealand dollar rose after US employment figures came in weaker than expected and encouraged traders to eschew the greenback amid growing prospects the Federal Reserve will print more money.

America added fewer-than-expected jobs in the private sector last month, and shed more than forecast overall, according to non-farm payrolls data, released on Friday in the US.

The weak labour data raised the prospect the Fed will extend its quantitative easing programme when it meets next month, and eroded investors' appetite for the greenback.

That comes as European policy makers at International Monetary Fund and group of seven nations meetings on the weekend joined the ranks of those complaining about their strong currencies, though nothing substantial came from the meetings.

"The US dollar on the back foot promotes strength in other currencies by default, and no-one wants a strong currency given the fragile outlook," said Mike Jones, strategist at Bank of New Zealand.

The non-farm payrolls data "ensured the sell theme remains firmly in place" for the US dollar, helping lift the kiwi higher, he said.

The kiwi rose to 75.59 US cents from 74.95 cents on Friday in New York, and it gained to 67.04 on the trade-weighted index of major trading partners' currencies from 66.72. It climbed to 62.15 yen from 61.73 yen last week, and was little changed at 76.48 Australian cents from 76.51 cents. It increased to 54.02 euro cents from 53.80 cents last week, and advanced to 47.42 pence from 47.26 pence.

Jones said the currency may trade between 75 US cents and 75.92 cents today in what will probably be a quiet day with the US and Japan on holiday.

Government data out today will show local spending on electronic cards last month, and will pick up the impact of the Canterbury earthquake and indicate whether there was a surge in spending before the government's hike in GST came into effect on October 1.

Jones said speculative investors are holding US$31 billion short positions, where they sell on the expectation they can buy at a cheaper price. That's three-times the long-run average, and the highest level since November 2007.

Businesswire.co.nz

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