The New Zealand dollar climbed to a three-month high against its Australian counterpart after a higher-than-expected unemployment rate across the Tasman made the local currency more attractive.
The kiwi rose as high as 93.83 Australian cents, the highest since March this year, and was trading at 93.79 cents at 5pm in Wellington from 93.57 at 5pm yesterday. It was unchanged at 88.20 US cents at 5pm from 8am, up from 87.93 at 5pm yesterday.
The Australian dollar fell after Federal government data showed the jobless rate rose to 6 percent in June, from a revised 5.9 percent rate in May, and higher than the 5.9 percent expected by traders. Job creation was slightly ahead of forecasts, with 15,900 new jobs added in the month, however 19,700 new part-time positions were offset by a fall of 3800 full-time positions. The Reserve Bank of Australia isn't expecting the jobless rate to come down consistently for some time, and some traders are anticipating the central bank will cut interest rates further.
The Australian data was "broadly a weak sign, because you've got the unemployment rate going up, you've got permanent jobs declining which was somewhat offset by part-time jobs increasing but not hugely," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand.
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"People play the relative spread between Australia and New Zealand," which will boost demand for the kiwi when if local interest rates become more attractive.
The kiwi rose after minutes from the Federal Reserve's June monetary policy meeting showed no change to the world's largest economy keeping interest rates low, making New Zealand's relatively high yield look attractive to investors.
"After the Fed's minutes boosted us up to 88.20 cents this morning, we've traded sideways - we haven't as yet, to the eternal consternation of everybody, created a new post-float high," Tuck said.
"Short-term price action suggests its going up and will take that 88.40 high out, but from a longer-term view and a medium-term view the strength does look like it is getting pretty stretched, it can't be forever, so take your holiday in Honolulu."
ANZ's Tuck said it was highly likely the kiwi would breach the post-float high 88.40 US cents during the Northern Hemisphere trading session.
The local currency rose to 89.55 yen at 5pm from 89.34 yen yesterday, was at 51.42 British pence from 51.31 pence, and traded at 64.64 euro cents from 64.56 cents yesterday. The trade-weighted index remained at a post-float high 81.91 at 5pm in Wellington from 81.72 yesterday.