NZ dollar falls vs. Australia dollar after unemployment rate drops below 6%

The New Zealand dollar dropped against its trans-Tasman counterpart after Australian jobs data showed the unemployment rate fell below 6 percent for the second time in 18 months, boosting the relative appeal of Australia's currency.

The kiwi fell to 91.70 Australian cents from 92.70 cents immediately before the release and 92.99 cents yesterday. The local currency was little changed at 65.56 cents from 65.55 cents at 8am and down from 65.81 cents yesterday.

The Australian dollar jumped after Bureau of Statistics figures showed the unemployment rate fell to 5.9 percent in October from 6.2 percent in September, eroding expectations the Reserve Bank of Australia will cut rates again next month. Australia added 60,000 jobs in the month, and lifted its participation rate 0.1 percentage points to 65 percent.

"Today's all about the employment report in Australia, which quite frankly, was stunning," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand. "Kiwi/Aussie moved quite dramatically, and that's really the story of the day."

ANZ's Tuck said the kiwi may face more downside against its Australian counterpart if dairy prices continue to fall, with whole milk powder futures pricing pointing to another decline.

New Zealand government data today showed food prices fell in October on cheaper milk, while private reports showed manufacturing activity slowed last month and consumer confidence improved.

The local currency declined to 4.1723 Chinese yuan from 4.1868 yuan yesterday after Chinese data yesterday showed increasing pace of growth in retail sales and slowing growth in industrial production, as the world's second-biggest economy transitions to consumer-led activity.

The kiwi dropped to 60.88 euro cents from 61.10 cents yesterday ahead of testimony from European Central Bank president Mario Draghi tonight, where traders will be looking for signals that more stimulus is likely. The local currency decreased to 43.04 British pence from 43.36 pence yesterday, and declined to 80.53 yen from 80.83 yen.

The trade-weighted index fell to 71.35 from 71.78 yesterday.

New Zealand's two-year swap rate gained three basis points to 2.79 percent at 5pm in Wellington, and the 10-year swap increased four basis points to 3.65 percent.

(BusinessDesk)