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[SYDNEY] The New Zealand dollar touched a two-week high on Wednesday after the country's jobless rate dropped to near eight-year lows last quarter, fuelling speculation the central bank's easing cycle may be almost done.
The New Zealand dollar climbed 0.4 per cent to US$0.7212, its highest level since Oct 20.
The kiwi had dropped 1.8 per cent in October after the Reserve Bank of New Zealand flagged the need to lower interest rates at its policy meeting next week to stoke domestic inflation as well as restrain a resilient currency.
"The RBNZ needs to deliver a 25 basis points cut on Nov 10 to avoid driving the exchange rate higher. But the domestic data continues to argue against further easing, making it a difficult balancing act for the RBNZ," said Josh Williamson, an economist at Citi.
The kiwi is still up 5.5 per cent so far this year, making it one of the best performing currencies in the developed world.
Data on Wednesday showed annual jobs growth reached a stunning 6.1 per cent, the fastest pace on record, while the participation rate hit a peak not seen in at least 25 years, at 70.1 per cent.
Also helping the currency is the recent rebound in the price of milk, its biggest export, with the Global Dairy Price index jumping 11.4 per cent at the latest auction.
The kiwi was strong on other crosses too. It rose against the Australian dollar, after two days of falls, and added 0.4 per cent against the yen.
The Australian dollar was more sedate, taking a breather after three straight days of gains. It held at US$0.7646, barely changed from the previous session.
It rallied 0.6 per cent on Tuesday after the Reserve Bank of Australia left interest rates at 1.5 per cent and refrained from including an explicit easing bias in its statement.
However, investors were nervous that the US election was turning out to be too close to call.
"November has gotten off to a frenzied start with shifting US election tracking polls now showing Clinton and Trump in a neck and neck race for the White House," said Stephen Innes, senior currency trader at Oanda Australia and Asia Pacific.
"With all the uncertainty in the markets, I suspect the Aussie dollar may fall to the broader US dollar whims."
New Zealand government bonds slipped on the jobs numbers, lifting yields five ticks across the curve.
Australian government bond futures rose, with the three-year bond contract up two ticks at 98.30. The 10-year contract rose three ticks to 97.6700.