NZ dollar trades in tight range ahead of key US jobs data

The New Zealand dollar traded in a tight range overnight as investors await a key US employment report at the end of the week for a gauge on the outlook for interest rates in the world's largest economy.

The kiwi advanced to 66.28USc at 8am in Wellington, from 66USc at 5pm yesterday, having traded between 65.69USc and 66.38USc cents. The trade-weighted index gained to 72.26 from 72.02 yesterday.

US economic data improved overnight, with reports showing manufacturing appeared to stabilise in February while car sales jumped and construction spending surged to its highest in more than eight years in January, boosting optimism the US economy is picking up in the first quarter. Still, Federal Reserve New York president William Dudley told a conference in China that he sees downside risks for the US economy, raising concern the Federal Reserve may raise interest rates at a slower pace than previously signalled.

Meanwhile in commodity markets, prices increased an average 1.4% at the latest GlobalDairyTrade auction, with New Zealand's key product, whole milk powder, gaining 5.5%, broadly in line with expectations. Oil prices rose on optimism of a possible output agreement amongst the large producers.

"The New Zealand dollar has range-traded overnight," Bank of New Zealand currency strategist Jason Wong said in a note. "The currency is expected to continue to range trade for the rest of the week, with US payrolls data on Saturday morning offering the next best chance to break out of the well-established 0.6550-0.6750 range."

The US non-farm payrolls report, which is a key indicator closely watched by the Fed, is expected to show US employers added 193,000 jobs in February, while the unemployment rate is forecast to hold at 4.9%, according to a Reuters poll. The Federal Reserve Open Market Committee is scheduled to hold its next two-day meeting March 15-16.

In New Zealand today, Quotable Value's report on February house prices is scheduled for release and vehicle sales data for the month may also be published.

The New Zealand dollar slipped to 92.27Ac from 92.48Ac yesterday after the Reserve Bank of Australia kept its benchmark interest rate on hold at 2%.

The local currency gained to 60.96 euro cents from 60.65 cents, edged up to 47.42 British pence from 47.34 pence, increased to ¥75.61 yen from ¥74.27 yen and rose to 4.3413 yuan from 4.3171 yuan.

(BusinessDesk)