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Kiwi gains in lead-up to Easter as US jobs data looms

BUSINESSDESK: The New Zealand dollar gained in the local trading session as investors prepare for the long Easter weekend, when US employment figures will be released on Friday and are expected to show more signs of life in the world’s biggest economy.

The kiwi rose to 81.70 US cents at 5pm from 81.40 cents at 8am, and was up from 81.60 cents yesterday.

The trade weighted index was little changed at 73.13 from 73.10.

Major financial markets worldwide will close for the Easter holiday this weekend, when US non-farm payrolls comes out.

Economists expect the US added 203,000 jobs last month, following on from a string of upbeat data that’s stoked optimism about the growth prospects for the world’s biggest economy.

“The market has hunkered down until Friday when payrolls comes out,” said Mike Jones, strategist at Bank of New Zealand.

“Through the week market sentiment got more negative, and today we’ve seen short investors take a bit of profit and hedge funds buy on dips,” he said, referring to the practice of selling on the expectation they can buy in at a lower price.

Jones said the kiwi is poised for more strength against its Australian counterpart having hit a six-month high this week, as the so-called lucky country’s economy continues to deteriorate.

That has put pressure on the Reserve Bank of Australia to cut interest rates, reducing the yield advantage Australia has over New Zealand.

“The Australian economy is coming off the boil,” Jones said. “The kiwi is likely to rise above 80 Australian cents in the next few weeks, reaching 85 cents by the end of the year.”

Traders are betting the RBA will cut 84 basis points from the 4.25% target cash rate in the next 12 months, according to the Overnight Index Swap curve, while at the same time expect the Reserve Bank of New Zealand will add 26 basis points to its 2.5% official cash rate over the same period.

The kiwi slipped to 79.32 Australian cents from 79.45 cents yesterday, and fell to 67.22 yen from 67.50 yen.

It climbed to 62.11 euro cents from 61.80 cents yesterday, and was little changed at 51.38 pence from 51.33 pence.