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Thursday in Asia, the New Zealand dollar plummeted against its major counterparts following disappointing jobs data and a warning from the head of the central bank about the country's slow and vulnerable emergence from recession.
The NZ dollar tumbled to a fresh 3-month low against the Aussie and a 2-day low against the euro.
The jobless rate in the third quarter increased to 6.5 percent from 6 percent in the previous three months, Statistics New Zealand said in Wellington today. Companies shed twice as many workers as economists forecast and the number of people out of work climbed to a 15-year high.
The number of unemployed people increased by 12,000 to 150,000 in seasonally adjusted terms. It was the highest number of unemployed New Zealanders since the March 1994 quarter.
Employment dropped 0.8 percent, or about 17,000 jobs, in the third quarter, today's report showed. Economists expected a 0.3 percent decline.
Finance Minister Bill English said yesterday he expects the jobless rate will rise to about 7 percent by mid-2010, less than the 8 percent peak the government estimated in its May budget.
Rising unemployment and a stronger currency may hamper the nation's recovery from the worst recession in three decades. The Reserve Bank of New Zealand Governor Bollard warned today the rebound will be slow and said currency traders betting New Zealand's economy can keep pace with neighboring Australia may get it wrong.
Bollard issued a warning to foreign exchange markets today, saying they need to differentiate between New Zealand and Australian economies.
Financial markets and businesses needed to appreciate the different futures the two countries were charting out of the global financial crisis, he said.
Speaking to the trans-Tasman business circle in Auckland, he said both countries had survived the crisis well, due to a mix of strong institutions and stimulative policies.
"New Zealand has had a recession, and the pick-up is slower and more vulnerable," than Australia, Governor Bollard said in Auckland.
"This is particularly evident in the relatively stable cross-rate on foreign exchange markets. If financial markets can't see the differences, they will eventually lose money, and it will hurt the New Zealand economy."
The New Zealand dollar fell to 1.2641 against the Aussie during Asian deals on Thursday. This set the lowest point for the kiwi since August 04. On the downside, 1.272 is seen as the next target level for the NZ dollar. At yesterday's close, the aussie-kiwi pair was quoted at 1.2584.
Demand for Australia's dollar was bolstered after the nation's trade deficit widened by less than economists forecast. The shortfall swelled to A$1.85 billion in September from a revised A$1.65 billion in August. September's deficit was smaller than the A$2.15 billion gap expected by economists.
The NZ dollar soared to near a 9-month high of 1.1944 against the Aussie on October 06. But the pair reversed its direction thereafter as the Aussie was supported by an unexpected rate hike by the Reserve Bank of Australia. In October, the RBA raised its benchmark interest rate by 25 bps to 3.25% from a 49-year low of 3%.
The aussie extended its uptrend against the kiwi in the subsequent weeks and it was further boosted by another 25 bps rate increase by the RBA on November 03. The RBA's rate currently stands at 3.5%.
The kiwi has declined more than 5% against the aussie since it reached a 9-month high in early October.
During Asian deals on Thursday, the New Zealand dollar slipped to a 2-day low of 2.0656 against the euro. The next downside target level for the kiwi is seen at 2.076.
The kiwi jumped to a 5-day high of 2.0335 against the euro in early European deals yesterday. However, the euro reversed its direction amid a survey data released by Markit Economics showed that the Euro-zone private sector activity expanded for the third month in October.
The kiwi resumed its slide in the New York session and closed the day's trading at 2.0527 against the euro. Thus far, the kiwi has dropped 1.5% against the euro from yesterday's 5-day high.
The New Zealand dollar plunged to 0.7181 against the US currency in Asian deals on Thursday. If the kiwi-greenback pair weakens further, it may find near term support around the 0.710 level.
The kiwi-greenback pair rose to a 5-day high of 0.7314 in afternoon New York trading yesterday as the Federal Reserve reiterated its intention to keep interest rates "exceptionally low" for "an extended period" as long as inflation expectations are stable and unemployment fails to decline. Policy makers held the target rate for overnight lending between banks at zero to 0.25 percent.
But the NZ currency pared its gains in late trading and the pair was worth 0.7244 at New York session close.
In Asian trading on Thursday, the New Zealand dollar plummeted to 64.88 against the Japanese yen. That was down 2.4% from yesterday's 5-day high of 66.50. The near term support for the NZ currency is seen around the 63.9 level. At yesterday's North American session close, the kiwi-yen pair was quoted at 65.76.
The minutes of the Bank of Japan's October meeting released today showed that there remains a degree of upside risk to the recovery of the emerging economies from the global slowdown
The minutes also indicated that the bank needs to continue to maintain the current accommodative conditions - while also making sure the markets are aware of that stance. A downtrend in process is expected to continue in the near term, the bank added.
Looking ahead, the Reserve Bank of Australia Governor Glenn Stevens is scheduled to speak before "The Australia's 2009 Economic and Social Outlook Conference" at 3:55 am ET.
At 5:00 am ET, the Euro-zone retail sales report for September is due out.
The major focus of the day will be on the interest rate decisions by the Bank of England and European Central Bank. Analysts expect the BoE and ECB to keep their interest rates unchanged at 0.5% and 1%, respectively.
From the U.S., the preliminary report on third quarter non-farm productivity and the weekly jobless claims report for the week ended October 31 have been slated for release.
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