NZ dollar eases against Aussie on strong jobs data
By Jenny Ruth
Feb. 21 (BusinessDesk) - The New Zealand dollar fell against its Australian counterpart after strong employment data across the Tasman but then recouped much of the decline after Westpac predicted the Reserve Bank of Australia will cut rates twice this year.
The kiwi was trading at 95.54 Australian cents at 5pm in Wellington from 95.72 cents at 8.15am. It was at 68.48 US cents from 68.61 cents and the trade-weighted index was at 73.98 from 74.15.
The data showed the Australian economy added 39,100 jobs in January, the participation rate firmed and the unemployment rate was steady at 5 percent. Full-time employment rose 65,400 with part-time jobs numbers falling 26,300.
Mark Johnson, private client manager at OMF, says the market had been expecting a 15,000 jobs increase. The “unambiguously strong” data prompted a rally in the Australian currency and pushed the cross rate as low as 95.34 Australian cents.
But the rally was stopped in its tracks by the Westpac announcement.
Chief economist Bill Evans says he expects the Australian central bank will cut its cash rate from 1.5 percent to 1.25 percent in August and to 1 percent in November.
“We have revised down our GDP growth forecasts for 2019 and 2020 from 2.6 percent to 2.2 percent,” Evans says.
“With the slower growth profile, we now expect to see the unemployment rate lift to 5.5 percent by late 2019. That makes a strong case for official rate cuts to cushion the downturn and, in turn, meet the RBA’s medium-term objectives,” he says.
The RBA recently lowered its 2019 GDP forecast from 3.25 percent to 3 percent.
Evans says momentum slowed dramatically through 2018 from an annualised rate of 4 percent GDP in the first half to about 1.5 percent in the second.
“Moving from a 1.5 percent pace to a 3 percent pace seems to be a very large stretch.”
Reserve Bank of New Zealand governor Adrian Orr, whose cash rate stands at a record low of 1.75 percent, has said his next move could be either up or down. Economists from ANZ Bank and Infometrics are predicting a rate cut by the end of this year. Most are picking the next move will be a rate hike which the RBNZ has pencilled in for the March or June quarters of 2021.
Johnson said the discovery in Devonport of a second Queensland fruit fly, another male, had little observable impact on the currency market.
The New Zealand dollar is trading at 52.48 British pence from 52.50, at 60.33 euro cents from 60.47, at 75.86 yen from 76.04 and at 4.5864 Chinese yuan from 4.6079.
The two-year swap rate is at 1.8750 percent from 1.8969 yesterday; the 10-year swap rate is at 2.8750 percent from 2.4800.