Currency: Kiwi snubs local data to end flat

The New Zealand dollar snubbed local wage rate and static employment numbers to trade in a narrow 5-point range yesterday.

At 5pm the kiwi was at US41.55c from Friday's US41.50c close.

"It has been absolutely dead," one local currency dealer said.

"We haven't even dealt today."

Statistics New Zealand's Quarterly Employment Survey showed private sector ordinary time average hourly earnings rose by 0.8 per cent in the three months ending August 31, slightly below a forecast 1.0 per cent rise in a Reuters poll.

The wages were up 3.4 per cent for the year, against the average market expectation for a 3.6 per cent rise.

The Labour Cost Index showed private sector salary and ordinary time wage rates rose 0.5 per cent in the September quarter, and are now 2.0 per cent higher over the year.

Of greater interest to the kiwi will be a rates decision by the US Federal Reserve on Wednesday morning, New Zealand time, followed by the Reserve Bank of Australia a few hours later, dealers said.

Following very gloomy jobs data out of the US on Friday, most economists now expect the Fed to cut by another half percentage point. Australia is expected to cut by a quarter as are the European Central Bank and Bank of England the next day.

The kiwi is expected to remain rangebound ahead of that data, trading between US41.50c and US41.65c overnight.

The Australian dollar ended local trade at US50.85c against US50.84c on Friday. The euro was slightly weaker at US89.84c compared with the US90.39c local close on Friday.

The trade-weighted index was at 49.46 against Friday's 41.50, while the Monetary Conditions Index was at minus 925 vs minus 938.

On the cross rates, the kiwi was buying A81.72c (versus A81.65 on Friday), 46.25 euro (45.93), 50.56 yen (50.54), 28.52p (28.36p), 90.45 marks (89.89), and 68.05 Swiss francs (67.58). The Australian dollar was buying $NZ1.2237 against $NZ1.2247 on Friday.

Bank of New Zealand's Craig Ebert said yesterday's smaller than expected rise in wage rates and static employment numbers "consigned any near term labour market inflation concerns to the sidelines," leaving the door open for the Reserve Bank to lower the official cash rate to 4.75 per cent, from its current 5.25 per cent, on November 14.

The money market is already pricing in a 50 basis point cut, with the 90-day bank bills ending at 4.92 per cent (4.93 per cent on Friday), the March 2002 bonds were at 4.81 per cent (4.81), November 2006 bonds at 5.65 per cent (5.60) and the November 2001s were at 6.15 per cent (6.09).

- NZPA