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NZ dollar heads for 1.4 percent weekly gain vs. A$ on divergent economies; US jobs data loom

The New Zealand dollar is heading for a 1.4 percent weekly gain against its Australian counterpart as the divergence between the neighbouring economies becomes clearer, ahead of next week's Reserve Bank of New Zealand policy review.

The kiwi rose to 90.45 Australian cents at 5pm in Wellington from 89.16 cents at the start of the week, though down from 90.76 cents yesterday. The local currency fell to 81.92 US cents at 5pm from 82.16 cents at 8am and 82.07 cents yesterday ahead of key US employment figures.

Economic data this week has reinforced the view that while New Zealand's economic recovery takes hold, Australian growth is stalling, raising the prospect of another rate cut by Australia's central bank. Traders are betting the RBA will hike interest rates by 16 basis points over the coming 12 months, compared to 107 points priced in for New Zealand's central bank.

The RBNZ will review the official cash rate in its final monetary policy statement for the year next week, and is expected to keep the key rate at 2.5 percent while acknowledging more signs of growth in the economy.

"There's a lot of good news to come out of New Zealand and more bad news to come out of Australia, suggesting the kiwi might go a little higher," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "Overall, we should get a slightly more positive tone" from the RBNZ's review next week, he said.

The kiwi is heading for a 0.8 percent weekly gain against the greenback ahead of the release of US non-farm payrolls, which are expected to show jobs growth in the world's biggest economy. Traders are paying close attention to US labour reports, with the Federal Reserve monitoring employment as one of bellwether measures on paring back its asset purchase programme.

A BusinessDesk survey of nine strategists and traders on Monday predicted the kiwi would trade between 79.80 US cents and 83.50 cents this week. Seven expected the currency to advance while two said it might fall.

The European Central Bank yesterday kept its key rate at 0.25 percent, while giving no indication of whether it will add more stimulus or not, and the Bank of England kept policy unchanged. The kiwi fell to 59.96 euro cents from 60.40 cents yesterday, and edged up to 50.17 British pence from 50.01 pence.

The local currency dropped to 83.44 yen from 84 yen yesterday. The trade-weighted index fell to 76.98 from 77.29 yesterday, and is heading for a 1 percent weekly gain.

(BusinessDesk)