Kiwi stays on the back foot after weak employment figures

The New Zealand dollar remained under pressure after yesterday's weaker than expected employment data added to the view that the Reserve Bank has plenty of scope to keep interest rates on hold for a protracted period.

The kiwi traded near a week-low at 74.33 US cents as at 8am in Wellington from 74.28 cents yesterday. The trade-weighted index was at 78.10 from 78.16 yesterday.

Government figures yesterday showed employment shrank 0.2 percent in the June quarter, surprising economists who had been anticipating a seventh straight quarter of expansion. While other details, including the headline unemployment rate at 4.8 percent, continued to show a robust labour market, the weaker employment reading prompted ASB Bank to push out its predicted timing for a rate hike until early 2019, bringing it in line with the central bank's own forecasts.

"The labour market reports weren't actually that bad, with other measures of employment and hours-worked showing solid gains, the unemployment rate falling to 4.8 percent, its lowest level since 2008, and wage growth showing hints of bottoming out in nominal terms," Bank of New Zealand currency strategist Jason Wong said in a note. "But with record long speculative positioning, the NZD is priced for perfection and there was nothing in the report to suggest that the RBNZ would move anytime soon from its neutral policy stance."

Local data releases today include Auckland real estate figures from the city's biggest realtor and the ANZ commodity price index, following yesterday's dip in dairy prices at the GlobalDairyTrade auction. Brent crude oil prices rose 0.9 percent to US$52.24 a barrel overnight and the CRB index of 19 commonly traded commodities gained 0.7 percent.

The kiwi traded at 93.27 Australian cents from 93.33 cents yesterday, and was little changed at 4.9950 Chinese yuan from 4.9957 yuan.

The local currency traded at 56.19 British pence from 56.23 pence yesterday ahead of a Bank of England policy review. Former deputy governor John Gieve told a business audience the central bank should raise interest rates and scale back some of the emergency stimulus deployed following the Brexit vote last year after the predicted economic slump didn't appear.

The kiwi edged down to 62.70 euro cents from 62.80 cents yesterday and traded at 82.26 yen from 82.34 yen.

(BusinessDesk)