The New Zealand dollar fell around one US cent after a shock rise in the unemployment rate to 7.3% in the December quarter.The NZ dollar fell to a five month low of 69.60USc from 70.80USc just before the report. It was at 69.80USc at 5pm from 71.06USc at
The New Zealand dollar fell around one US cent after a shock rise in the unemployment rate to 7.3% in the December quarter.
The NZ dollar fell to a five month low of 69.60USc from 70.80USc just before the report. It was at 69.80USc at 5pm from 71.06USc at the same time yesterday.
The higher than expected increase in unemployment means interest rates may remain lower for longer, which makes the NZ dollar less attractive to investors.
"It was a huge shock to the market," said Imre Speizer, currency strategist at Westpac.
The Reserve Bank of New Zealand (RBNZ) was expecting an unemployment rate of 6.6%, while the market was expecting 6.8%.
"It is an important input into the RBNZ's thinking on when it will start hiking rates and the consensus prior to the number was April. The probability of an April hike has diminished considerably and we are now looking at June," Mr Speizer said.
Yields in the swap market also fell in response to the data. The two-year swap rate fell by about 10 basis points to 4.27 percent, dealers said.
The overnight index swap, which is an indicator of what the market thinks the official cash rate will be, also fell about 10 basis points.
Mr Speizer said the currency had strong support at 69.75USc so the NZ dollar should hover around this level for a while.
"Unless you get some positive surprises from somewhere else in the world I think eventually we will break below this," he said.
Reuters reported that weakness in high yielding currencies like the NZ dollar helped keep the US dollar broadly steady in Asia today.
The NZ dollar eased to 79.26Ac by 5pm from 80.23Ac at 5pm yesterday.
Against the euro it was at €0.5028 from €0.5089 yesterday and against the yen ¥63.44 from ¥64.21.
The trade weighted index fell to 64.52 from 65.44.
