The New Zealand dollar rocketed toward US79c today after employment data suggested the economy was performing better than expected.The strong September quarter employment report hit the market when the US dollar was weak on the expectation that the Federa
The New Zealand dollar rocketed toward US79c today after employment data suggested the economy was performing better than expected.
The strong September quarter employment report hit the market when the US dollar was weak on the expectation that the Federal Reserve may do more to boost the US economy after today unveiling plans to buy $US600 billion in government bonds. The move to effectively print money undermines the US dollar.
The NZ dollar spiked to US78.85c, its highest level since May 2008, after Statistics New Zealand said the unemployment rate fell to 6.4 percent in the September quarter and employment increased by 23,000, or 1 percent. The increase in employment was twice what the market was expecting.
The NZ dollar had earlier risen to US77.85c at 8am from US77.08c at 5pm yesterday after the Fed move.
"It has all gone the kiwi dollar's way this morning," said Mike Jones, currency strategist at BNZ.
The unemployment rate was more than the 6.2 percent the Reserve Bank of New Zealand (RBNZ) was expecting but less than the 6.7 percent the market was expecting.
"It is really a surprise for the market, rather than the RBNZ," Mr Jones said.
The two-year swap rate rose to 4.05 percent from 3.95 percent.
Mr Jones said the RBNZ was expected to raise the official cash rate in March next year. Today's data did not change that expectation but it removed a risk that the tightening could be pushed back.
Meanwhile, the policy easing by the Fed was a touch more than people were expecting. The US dollar remained weak because the Fed left the door open for even more purchases of government securities next year.
The move comes after republicans gained ground in the US mid-term elections, further complicating the debate about US economic policy direction.
The NZ dollar made up some ground on the Australian dollar, buying A78.24c by early afternoon from A77.28c at 5pm yesterday. It also gained to 63.73 yen from 62.21.
Against the European currency, the NZ dollar was higher at 0.5562 euros by early afternoon from 0.5501 at 5pm yesterday, while the trade weighted index rose to 69.06 from 67.98.
