The New Zealand dollar fell against its Australian counterpart after jobs figures across the Tasman beat expectations, but held near a two-month high against a weaker greenback after the Federal Reserve continued to signal muted inflation.

The kiwi dropped to 91.30 Australian cents as at 5pm in Wellington from 91.77 cents late yesterday. It rose to 70.01 US cents from 69.54 cents late yesterday after touching 70.23, the highest since Oct. 19.

The local currency lost ground against the Aussie after data from the Australian Bureau of Statistics showed 61,600 new jobs were added in November versus expectations for 19,000. The number of people in full-time work rose by 41,900 last month, while those in part-time work rose by 19,700. The unemployment rate held steady at 5.4 per cent.

Meanwhile, the kiwi held its own against the US dollar after the Federal Open Market Committee delivered a much-anticipated interest rate hike but warned "inflation on a 12‑month basis is expected to remain somewhat below 2 per cent in the near term but to stabilise around the committee's 2 per cent objective over the medium term" and that it's watching those developments "closely".

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"The big stuff for the currency market was the FOMC and the Aussie jobs report," said Westpac Bank Senior Strategist. "The US dollar is on the backfoot, which is helping push the kiwi up." He noted the kiwi also gained after getting overly sold during the election period and "is still undervalued according to our fair value models."

Speizer said the government's half-year economic and fiscal update had little impact on the currency but government bond yields did fall at the long end as the market had expected more bond issuance, with the yield on the 10-year government bond down around six basis points to 2.79 per cent. The New Zealand Debt Management Office lifted its issuance programme by $1 billion through June 2022 compared to its prior forecasts despite higher spending needs.

Annette Beacher, chief Asia-Pac macro strategist for TD Securities said, however, she doesn't favour medium to longer-dated New Zealand government bonds ahead of "inevitable issuance upgrades down the track."

New Zealand's two-year swap rate fell 1 basis points to 2.16 per cent and the 10-year swaps fell 2 basis points to 3.09 per cent.

Looking ahead, Westpac's Speizer said markets will focus on the Bank of England and the European Central Bank statements later in the global trading day as well as US retail sales data "which will be a market mover".

The trade-weighted index was at 73.76 from 73.62. The kiwi traded at 52.11 British pence from 52.18 pence and was unchanged at 59.15 euro cents. It was little changed at 78.83 yen from 78.77 yen yesterday and rose to 4.6278 yuan from 4.6031 yuan.