Australia, NZ dollars hold nerve into crunch US jobs data

[SYDNEY] The Australian and New Zealand dollars held firm on Friday after surprisingly soft economic data out of the United States stirred talk the all-important payrolls report might also underwhelm.

The Australian dollar was steady at US$0.7544, after rising around half a cent overnight, though that merely lifted it back to where it ended the previous week.

Its US counterpart took a knock after the closely-watched ISM survey of manufacturing showed its index of activity sank to 49.4 in August, from 52.6 in July, well under forecasts.

The survey's employment index also declined and fed speculation the payrolls report due later on Friday could miss expectations that 180,000 new jobs were created in August.

A soft outcome would only reinforce market wagers that the Federal Reserve will not be able to hike rates at its meeting later this month given the absence of immediate inflation pressure.

"The worry for some Fed officials remains an absence of a generalised pickup in inflation," wrote ANZ analysts in a note. "Thus a relatively large (payrolls) outturn relative to expectations, along with more evidence of a pickup in wages, is probably needed to get the market thinking of a near-term hike from the Fed."

The New Zealand dollar likewise held at US$0.7284, after rising from as low as US$0.7223 overnight.

Domestic economic news was again upbeat with building work done jumping a hefty 5.5 per cent in the June quarter, on top of an already outsized 5.7 per cent rise in the March quarter.

"Today's data was even stronger than expected, and therefore supports our view that June quarter GDP growth is likely to be another strong reading, in the region of 0.9 per cent for the quarter," said David Norman, industry economist at Westpac.

"If anything, this result suggests some upside potential for our current forecasts."

A 7.1 magnitude earthquake off the coast of the New Zealand's North Island had little impact on markets as there was no significant damage.

New Zealand government bonds eased, sending yields up between 2.5 and 3 basis points.

Australian government bond futures were a shade lower as everyone waited on the US jobs numbers. The three-year bond contract eased 2 ticks to 98.580, while the 10-year contract dipped a tick to 98.1400.

REUTERS