The New Zealand dollar recovered ground against its trans-Tasman counterpart after falling unemployment firmed up expectations for a rate hike by the local central bank, after the Reserve Bank of Australia yesterday scotched the chance of another cut.
The kiwi rose to 92.28 Australian cents at 5pm in Wellington from 91.46 cents yesterday. It traded at 82.01 US cents at 5pm from 82.16 cents yesterday, holding its gain from 80.94 cents yesterday.
New Zealand's unemployment rate fell 0.2 of a percentage point to 6 per cent in the December quarter, with jobs growth more than twice the expected pace, spurred by gains in retail and hospitality. That's the last piece of major data before Reserve Bank governor Graeme Wheeler reviews monetary policy in March, when he's widely expected to embark on a tightening cycle of higher interest rates.
The kiwi dollar tumbled against its Australian counterpart yesterday when the RBA dropped its reference for further policy adjustments, instead saying rates will remain stable for some time, reducing the potential gap between trans-Tasman interest rates. The RBA will release its updated forecasts on Friday.
"The kiwi/Aussie bounced back on the jobs data, which was on expectations, no more, no less," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. "The kiwi/Aussie came off a bit after the RBA came out and said things weren't quite as bad."
