The New Zealand dollar fell to its lowest level in more than three months after a report today showed the jobless rate unexpectedly rose.
The so-called kiwi weakened versus all of its major peers and the two-year swap rate matched a record low after unemployment exceeded the most pessimistic forecast in a Bloomberg News survey of economists. The currency also slid after a purchasing managers’ index yesterday showed euro-region manufacturing contracted for a ninth month. Australia’s dollar dropped for a fourth day versus its U.S. peer as Asian stocks declined, snapping a three-day gain.
“The overall unemployment headline number is worse,” said Tim Kelleher, Auckland-based head of institutional foreign- exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “It’s obviously higher than the market expected. The kiwi didn’t like the data initially on the knee-jerk number.”
The New Zealand dollar lost 0.5 percent to 80.65 U.S. cents as of 4:23 p.m. in Sydney after earlier dropping to 80.41 cents, matching the lowest level since Jan. 23. It fell 0.4 percent to 64.72 yen, after sliding to 64.43, the lowest since Feb. 14. The so-called Aussie retreated 0.2 percent to $1.0308 and declined 0.1 percent to 82.73 yen.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell 10 1/2 basis points to 2.60 percent, matching the Nov. 24 low which is the least recorded in Bloomberg data going back to 1993. The yield on Australia’s 10- year note dropped seven basis points to 3.58 percent. It reached a record low of 3.53 percent on May 1.
The MSCI Asia Pacific excluding Japan Index of shares lost 0.3 percent, paring this week’s gain to 1.3 percent. Japan’s markets are shut today and tomorrow for public holidays.
New Zealand’s unemployment rate rose to 6.7 percent in the three months through March 31, the highest since 2010, from a revised 6.4 percent in the previous quarter, the country’s statistics office said today in Wellington. Economists predicted a 6.3 percent rate.
Reserve Bank of New Zealand Governor Alan Bollard has kept the official cash rate at a record-low 2.5 percent since March last year and signaled last month that level remained appropriate amid benign inflation.
“Should the exchange rate remain strong without anything else changing, the Bank would need to reassess the outlook for monetary policy settings,” he said in an April 26 statement.
New Zealand’s dollar has advanced 1.8 percent this year, the best performer after the British pound and the Norwegian krone among the 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes.
‘Scope to Ease’
Today’s New Zealand unemployment report may contribute to lowering the central bank’s inflation outlook and may “create scope to ease monetary policy,” Matthew Johnson, an interest- rate strategist at UBS AG in Sydney, wrote in a note today.
The probability of a reduction in the benchmark interest rate by September has climbed to more than 60 percent from less than 50 percent yesterday, according to swaps data compiled by Bloomberg.
Demand for the kiwi was also tempered on signs Europe’s economy is struggling to recover as it deals with its debt crisis.
London-based Markit Economics said yesterday its purchasing managers’ index of euro-region manufacturing fell to a 34-month low of 45.9 in April from 47.7 in March.
“Further tests of key support levels are likely for the New Zealand dollar as global PMI releases falter,” Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland, wrote in a report today.
The Aussie dollar also weakened after a gauge of the nation’s services industry released by Commonwealth Bank of Australia and the Australian Industry Group fell to 39.6 in April from 47 in March. That’s the weakest since March 2009.
The currency has lost 1.6 percent since April 27, set for its first weekly slide in almost a month. The Australian dollar climbed to NZ$1.2831, the strongest since March 23, before trading at $1.2782, 0.3 percent above yesterday’s close.
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