New Zealand dollar jumps on upbeat job data; Australian dollar treads water

[SYDNEY] The New Zealand dollar climbed to the highest in more than a week on Wednesday after the jobless rate fell to a near nine-year low, cheering investors, while its Australian cousin held within recent ranges.

The New Zealand dollar was quick to add about 1 per cent to go as high as US$0.6915, a level not seen since Oct 24, after data showed jobs grew a sizzling 2.2 per cent in the third quarter, far better than expectations of a 0.8 per cent rise.

The participation rate increased to an all-time peak of 71.1 per cent as more people went looking for work, while the employment rate also ballooned to the highest on record.

The labour cost index increased an annual 1.9 per cent, up from 1.7 per cent in the year to June, the largest increase since September 2012.

Such strong numbers boosted sentiment in the heavily-battered kiwi, which had just posted its worst monthly loss since January 2016.

Analysts were circumspect about the policy implications though, with the new left-leaning Labour coalition government considering adding full employment to the Reserve Bank of New Zealand's policy mandate.

"The RBNZ, like us, is likely to look through some of the volatility in labour market data figures over the recent quarters," said Zoe Wallis, chief economist at Kiwi Bank.

"Nevertheless, the robust set of labour market figures adds to recent stronger indicators of inflation pressure," Wallis added.

"We believe that wage pressure will build over the coming year and add to the case for earlier OCR hikes than the RBNZ has signalled."

The central bank is currently predicting a rate hike will not come until 2019, though the market favours late next year.

Volumes in kiwi trades surged multi-fold after the figures, according to Thomson Reuters data, with the New Zealand currency rising to a two-week high against its Australian counterpart.

The Australian dollar was steady at US$0.7658 against the US dollar, having spent four sessions in a narrow band of US$0.7625/7700. The Aussie posted its third straight month of losses in October, largely on a resurgent greenback.

Investors awaited data on building approvals and trade on Thursday, and retail sales on Friday to shape views around the economy and the policy outlook.

The Reserve Bank of Australia (RBA) has kept rates unchanged at a record low 1.50 per cent for more than a year now and it remains dogged in its determination to stay on hold for a while yet.

New Zealand government bonds eased, sending yields about 1.5 basis points higher across the curve.

Australian government bond futures slipped too, with the three-year bond contract and the 10-year contract down 2 ticks each at 97.980 and 97.2900.

REUTERS