The New Zealand dollar fell an Australian cent and three-quarters of a US cent after weaker than expected employment figures revived the possibility that the Reserve Bank may cut interest rates.

The kiwi was trading at 67.54 US cents at 5pm in Wellington from 68.30 at 8am and at 95.02 Australian cents from 96.01.

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"The jobs data gave the local markets a big ouchie," says Peter Cavanaugh, the senior client adviser at Bancorp Treasury Services.

The unemployment rate came in at 4.3 per cent in the December quarter when the market had been expecting 4.1 per cent. The September quarter figure was also revised up to 4 percent from 3.9 per cent.

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"The market was expecting a rebound after the horribly optimistic September number but they weren't expecting the extent of this jump," Cavanaugh says.

"The unemployment rate went up, even though the participation rate went down, making the headline number even worse."

The participation rate was 70.9 per cent compared with market expectations of 71.1 per cent.

Capping off the surprises, the number of those employed rose just 0.1 per cent while the Labour Cost Index rose 0.5 per cent against expectations of 0.6 per cent.

"All in all, the data indicated that wage inflation is even less of a threat to the Reserve Bank and an OCR rise is off the table in the near term," Cavanaugh said, referring to the central bank's official cash rate.

"As market don't do sideways, it meant that the next move was going to be down."

The market went from pricing in a 54 per cent chance of a rate cut this year to a 66 per cent chance after the data's release.

The New Zealand market is now looking to next week's monetary policy statement and expecting Reserve Bank governor Adrian Orr to confirm the weaker outlook.

If he does, he will be following in the footsteps of Reserve Bank of Australia governor Philip Lowe and Federal Reserve chair Jerome Powell who have both turned considerably more dovish lately.

The New Zealand dollar is trading at 52.24 British pence from 52.76, at 59.45 euro pence from 60.08, at 74.23 yen from 75.11 and at 4.5546 Chinese yuan from 4.6059.

The trade-weighted index fell to 73.22 points from 74.00.

Reflecting the increased chance of a rate cut, the two-year swap rate fell as low as 1.7980 per cent today. It is now trading at 1.8072 per cent from 1.8980 late Tuesday.

Cavanaugh says all the swap rates out to five-years were affected. The five-year swap rate fell below 2 per cent for the first time, and the one to three-year swap rates are now below the 90-day bank bill rate of 1.92 per cent. The 10-year swap rate is at 2.4275 per cent from 2.5030.