Kiwi gains as Australian jobless rate falls, ECB looms

BUSINESSDESK: The New Zealand dollar gained in "thin" trading after Australia's unemployment rate unexpectedly fell and as investors prepare for the European Central Bank meeting.

The kiwi edged up to 79.56 US cents at 5pm in Wellington from 79.43 cents at 8am and 79.45 cents yesterday. The trade-weighted index was little changed at 71.62 from 71.63 yesterday.

Australia's jobless rate fell to 5.1% last month, according to government figures, as the participation rate shrank to 65% and the workforce fell by 8800. Traders jumped on the headline figure, lifting the Australian dollar 0.3% to $US1.0213.

The figures come after yesterday's slowing pace of growth in the second quarter weighed on support for Australian assets.

"The kiwi got dragged higher on the back of the Aussie jobs data," says Tim Kelleher, head of institutional FX sales at ASB Institutional. "If you look at the detail and the participation, people stopped looking for jobs."

Markets are preparing for the ECB meeting tomorrow where president Mario Draghi is expected to unveil plans for an unlimited bond buying plan for distressed government debt with maturities of up to three years.

The bank has been looking at ways to protect the region's single currency and shore up the eurozone's fragile financial stability.

The kiwi fell 63.13 euro cents, near a two-month low, from 63.34 cents yesterday.

Mr Kelleher says the kiwi may break below 63 euro cents, with the German Constitutional Court to rule on the legality of the European Stability Mechanism and the region's bailout fund next week.

"That could kybosh lots of things – it's all tentative steps." 

The Bank of England will review monetary policy tomorrow and is likely to keep the benchmark interest rate at 0.5% and maintain its asset purchase programme at £375 billion.

The kiwi was little changed at 50.06 pence from 50.08 pence yesterday and was almost unchanged at 77.87 Australian cents from 77.88 cents. It traded at 62.40 yen from 62.47 yen yesterday.