The New Zealand dollar gained against its Australian counterpart after jobs data across the Tasman was weaker than expected, adding to the view the RBA - like the New Zealand central bank today - won't be lifting rates anytime soon.
The New Zealand dollar traded at A93.40c at 5pm from A93.05c at 8am and A93.29c yesterday. It rose to US72.35c from US71.78c late yesterday, in the face of US dollar weakness after the US Federal Reserve hiked interest rates as expected but only signalled two more increases this year.
The kiwi got a lift when figures from the Australian Bureau of Statistics showed 17,500 net new jobs were added in February versus forecasts for 20,000. The unemployment rate lifted to 5.6 per cent from 5.5 per cent in January. Economists had expected 5.5 per cent.
"The weaker Aussie jobs number led people to buy kiwi and that's pushed it slightly higher on the day," said Ross Weston, a senior trader at Kiwibank. "There were some forecasts that were a lot higher than the 20,000. It was mildly weaker and the market was geared up for something bigger, so it's just a bit of an unwind," he said.
Economists said the Aussie jobs data points to ongoing tepid inflation and means the Reserve Bank of Australia is unlikely to lift rates in the immediate future.
"Australia does not have a problem creating jobs, as employment continued to grow at its fastest rate in a decade in February. But there is still a lot of slack in the market that will need to be used up before wage growth rises significantly," said Paul Dales, chief Australia and New Zealand economist for Capital Economics.
The kiwi didn't react when Acting Reserve Bank governor Grant Spencer kept the official cash rate unchanged at 1.75 per cent today and continued to signal that rates will remain on hold due to the lack of inflationary pressure.
Spencer "basically just handed the ball over to Adrian Orr," said Weston.
Orr is due to take the helm of the RBNZ next Tuesday and investors are keen to see the new policy targets agreement (PTA) that is expected to change the central bank's long-held exclusive focus on inflation targeting to include an employment objective as well as what tone Orr will set.
The trade-weighted index rose to 74.24 from 73.97.
The local currency traded at 76.45 yen from 76.42 yen and at 51.08p from 51.23p. The kiwi traded at 58.51 euro cents from 58.53 cents and rose to 4.5716 yuan from 4.5460 yuan.
New Zealand's two-year swap rate eased 1 basis point to 2.23 per cent and the 10-year swap rate fell 4 basis points to 3.14 per cent.