Kiwi falls on US jobs optimism

The New Zealand dollar is heading for a 2.1 per cent weekly decline against the greenback in the lead- up to US employment data that will point to whether the Federal Reserve will raise interest rates later this year.

The kiwi fell to US71.32c at 5pm yesterday from US72.81c last Friday, and down from US71.67c on Thursday. The trade- weighted index was heading for a 1.2 per cent weekly decline to 76.32, down from 76.44 on Thursday.

Economists were predicting 172,000 jobs were added in the US last month ahead of the release of non- farm payrolls dataovernight in Washington, and investors will be watching the figures for whether the labour market is healthy enough to warrant another rate hike later this year.

New Zealand’s Reserve Bank is poised to cut the official cash rate, which would reduce the appeal of NZ’s interest rate differential.

A fed rate hike still isn’t fully priced in and “if we do see it come, the kiwi dollar could come under a bit more pressure at the end of the year and we’ve got a bit of talk about what the RBNZ will do in its final meeting of the year”, said John Chisholm, senior trader at HiFX in Auckland. “The market will go back into it’s wait- and- see ahead of non- farms.”

New Zealand’s t wo- year swap rate increased one basis point to 2.05 per cent and 10- year swaps were up 1 basis point to 2.58 per cent. A slump in the British pound against the greenback also weighed on the kiwi as investors wound back their holdings of risksensitive assets.

Sterling fell to a 31- year low as investors adjust to the prospect of the UK’s prioritising immigration curbs when it exits the European Union. The kiwi jumped to 57.34 pence from 56.32p on Thursday.

The local currency increased to 64.17 euro cents from 63.99 cents on Thursday and traded at A94.10c from A94.22c. It was little changed at 74.02 yen on Thursday and fell to 4.7560 Chinese yuan from 4.7793 yuan.