The New Zealand dollar fell to a five-week low against its Australian counterpart as rising unemployment at home and stronger job prospects across the Tasman stoked talk the gap in interest rates won't narrow any time soon.
The New Zealand dollar fell to 81.57 US cents from 81.67 cents at 5pm in Wellington yesterday. The kiwi fell to 78.22 Australian cents, near the lowest since September 6, from 78.49 cents.
New Zealand's unemployment rate unexpectedly rose to 7.3 per cent in the third quarter, while in Australia, the economy added 10,700 jobs last month, beating expectations. A weak jobs market gives Reserve Bank governor Graeme Wheeler more scope to cut the official cash rate from a record low 2.5 per cent, widening the gap with Australia's 3.25 per cent rate.
"The employment figures were a bit of a shock and increase the odds of an interest rate cut in New Zealand," said Dan Bell, currency strategist at HiFX. Wheeler is more likely, though, to try to talk rates down while there's still a prospect the RBA will actually cut rates, he said.
Stocks fell overnight, with the Standard & Poor's 500 Index down 0.8 per cent, amid more gloom from Europe, where the central bank kept its key rate unchanged and said there are no signs of a pickup in economic growth.
Weak stocks mean "it's looking like more downside (for the kiwi) over the next 24 hours," Bell said.
Still, figures from the Real Estate Institute, showing house sales jumped by almost a third in October from a year earlier and set a new record median house price of $380,000, suggest there are still signs of life in the domestic economy even as the dole queue grows.
The trade-weighted index fell to 72.98 from 73.11 and the kiwi dropped to 64.74 yen from 65.13 yen.
The kiwi traded at 63.97 euro cents from 63.99 cents and was at 51.05 British pence from 51.07 pence.