The New Zealand dollar touched its lowest level in more than two weeks against the Aussie dollar after upbeat Australian employment data yesterday boosted investor optimism about the outlook for the economy.
The kiwi hit 88.86 Australian cents and was trading at 89.06 cents at 8am in Wellington, from 89.38 cents at 5pm yesterday. The local currency edged up to 68.52 US cents from 68.42 cents yesterday.
The Australian dollar rose after a report yesterday showed the jobless rate unexpectedly dropped to the lowest level in two-and-a-half years in March and employment rose more than forecast. The report came after upbeat Chinese trade data this week suggested Australia's largest trading partner may be reducing its stockpiles, stoking optimism about a pick-up in the Australian economy and prompting traders to pull back their bets for potential future interest rate cuts.
"We had that much better-than-expected Australian data yesterday. It's very solid data and that was enough to kick this 11-day trend that we have had with the elevated kiwi against the Australian dollar," said Stuart Ive, senior dealer, foreign exchange at OMF. "The trade balance data suggests that China might start restocking their supplies soon, and that will be an additional plus for the Australian economy. If they start doing well on two fronts, the service industry and the mining industry, they will be going great guns."
OMF's Ive said the kiwi may decline further against the Aussie, although it has support around the 88-88.20 Australian cent level.
Today, the focus will be on a slew of Chinese economic data releases including gross domestic product, industrial production, retail sales and fixed-asset investment. An improvement in industrial production would suggest increased future demand for Australian commodities such as iron ore, he said.
"If we start to see clear evidence that they are beginning to resupply their inventories then Australia clearly is going to take off because instead of firing on three cylinders they are going to fire off all six and off they go!"
The Reserve Bank of Australia also publishes its financial stability review report today.
The New Zealand dollar was little changed at 48.41 British pence from 48.40 pence yesterday after the Bank of England kept interest rates unchanged as expected.
The local currency advanced to 60.87 euro cents from 60.74 cents yesterday, edged up to 74.97 yen from 74.87 yen, and gained to 4.4408 yuan from 4.4353 yuan. The trade-weighted index was at 72.38 from 72.36.