Dollar gains vs AU as Australian unemployment rate climbs to decade-high

The New Zealand dollar rose against its trans-Tasman counterpart after government figures showed Australian unemployment rose to a decade high in July.

The kiwi gained to 91.20 Australian cents at 5pm in Wellington from 90.61 cents immediately before the release and 90.58 cents yesterday. It was little changed at 84.67 US cents at 5pm from 84.70 cents at 8am, up from 84.28 cents yesterday.

Australia's unemployment rate rose to 6.4 percent in July from 6 percent in June, according to Bureau of Statistics. That's the highest level of joblessness since August 2002, and raised concern the Reserve Bank of Australia may cut interest rates again. The RBA kept the key rate at 2.5 percent this year, retaining its view that a period of interest rate stability is the most prudent course.

"The unemployment number might provoke people to price in a bit more chance of a rate cut," said Martin Rudings, senior dealer foreign exchange at OMF. "If that gains any traction, then the kiwi/Aussie cross will go back up to the 93s."

OMF's Rudings said the persistent strength of the kiwi against the greenback and on a trade-weighted basis was getting more out of line with commodity prices, and could prompt the Reserve Bank to try to talk the currency lower, or even intervene.

Local data today showed New Zealand property values rose at a slower annual pace in July as rising interest rates, restrictions on low-equity mortgage lending and the onset of winter cooled the housing market.

Investors will be watching the European Central Bank and Bank of England policy meetings in the Northern Hemisphere trading session. Neither central bank is expected to move on policy, although deteriorating economic data in Europe may spur a response from the ECB.

The kiwi rose to 63.24 euro cents at 5pm in Wellington from 63.05 cents yesterday, and gained to 50.23 British pence from 49.96 pence. It traded at 86.53 yen from 86.44 yen yesterday. The trade-weighted index increased to 79.39 from 79.07 yesterday.

(BusinessDesk)


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