The New Zealand dollar fell after unemployment data for the June quarter surprised on the upside after surprising on the downside last quarter.
Investors are scratching their heads but said the 6.8% unemployment rate in the June quarter was consistent with a slow recovery and increased the chance that the Reserve Bank will pause in its next interest rate review or the one after that.
The drop in the unemployment rate from 7.1% to 6% in the March quarter had been hard to reconcile.
The NZ dollar fell sharply on today's data from 73.57USc to 72.75USc but quickly consolidated and was at 72.95USc by 5pm. It was 73.52USc at 8am compared with 73.44USc at 5pm yesterday.
"There was a big reaction immediately and then it stabilised quickly," said Imre Speizer, senior currency strategist at Westpac.
He said the headline grabbing unemployment number raised questions about the quality of the survey and caused people to question if the RBNZ would hike next month, but the detail in the survey was positive.
"It has increased the chances of a pause next month but we still think they will go," he said.
To go in two quarters from an unemployment rate of 7.1% to one of 6.8% was more in line with history and consistent with other data on the economy.
But the central bank was not getting traction with its monetary policy tightening because yields in the wholesale money market have fallen, rather than risen.
The two-year swap rate has fallen around 40 basis points since the RBNZ started tightening. It fell around five to seven basis points to 6.39 percent today.
The NZ dollar also fell against the Australian dollar to be 79.68Ac by 5pm from 80.16Ac at 8am and 80.49Ac at 5pm yesterday.
It was at €0.5544 from €0.5558 yesterday, and ¥62.83 from ¥62.72.
The trade weighted index fell to 67.37 by 5pm from 67.68 at the same time yesterday.