NZ dollar jumps after weak US employment data

The kiwi touched a high of 66.73 US cents over the weekend, and was trading at 65.88 cents at 8am in Wellington, from 65.82 cents at the New York close and 65.87 cents at 5pm on Friday. Photo: NZ Herald.

The New Zealand dollar jumped higher after weak data on US employment costs prompted traders to pull back expectations for US interest rate hikes.

The kiwi touched a high of 66.73 US cents over the weekend, and was trading at 65.88 cents at 8am in Wellington, from 65.82 cents at the New York close and 65.87 cents at 5pm on Friday.

The trade-weighted index was little changed at 70.28 from 70.31 on Friday.

The greenback weakened after the US second quarter employment cost index recorded its slowest quarterly pace of growth on record.

The data raised concern weak inflation may prompt the US Federal Reserve to hold off raising interest rates this year.

"The US dollar weakened after the ECI index disappointed," ANZ Bank New Zealand agri economist Con Williams and senior FX strategist Sam Tuck said in a note

"This strengthened the hand of dovish members of the Federal Reserve Open Market Committee who remain circumspect about when inflation will return to the Fed's target."
The US employment cost index advanced 0.2 per cent in the second quarter, less than the 0.6 per cent gain expected and down from 0.7 per cent the previous quarter.

While subsequent analysis revealed it was mostly due to one-off factors, the reaction shows how sensitive markets are to US data, ANZ said.

Tonight, the focus will be on US manufacturing, personal income and spending data.

ANZ expects the kiwi to trade between 65.20 US cents and 66.50 cents today.

The New Zealand dollar slipped to 90.12 Australian cents from 90.20 cents on Friday.

Australia has data on manufacturing, inflation and job advertisements for July, as well as new home sales for June.

The local currency fell to 59.97 euro cents from 60.17 cents on Friday. It was little changed at 81.65 yen from 81.66 yen on Friday and at 42.12 British pence from 42.18 pence.