NZ dollar gains after jobless rate undershoots forecasts

NZ dollar gains after jobless rate undershoots forecasts

By Jason Krupp

May 5 (BusinessDesk) - The New Zealand dollar gained after government figures showed the unemployment rate dropped to 6.6% in the first quarter, narrowly beating market expectations.

The kiwi dollar climbed to 79.32 U.S. cents immediately after the announcement from 79.02 cents beforehand, and recently traded at 79.26 cents. The data from Statistics New Zealand beat a Reuters forecast of 6.7%. The December quarter's rate was revised to 6.7% from 6.8%.

"The data is consistent with our view that the Reserve Bank will need to raise rates before the end of the year, probably around the December mark," said Mike Jones, a markets strategist at Bank of New Zealand. "It's just another data release that suggests the bank should keep on their toes, and is indicative of higher inflation pressures ahead."

The data showed the labour force participation rate crept up 0.8 percentage points to 68.7%, the highest level since December 2008, in a sign jobs were becoming easier to come by.

Additionally, the total number of people employed rose 1.4% in the period to 2.2 million, the most since June 2008, while those not in the labour force dropped 2.2% to 1.1 million.

Jones said the data would need to be taken with a pinch of salt as it did not capture the effects of the February 22 earthquake in Christchurch, but was a positive sign that the economy was picking up steam prior to the temblor.

The effects of the upbeat labour numbers on the currency are expected to temporary, Jones said, with prevailing risk-off theme on global markets likely to drive the kiwi's movements today.

(BusinessDesk)

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