Aussie nears two-month high on jobs; kiwi drops on RBNZ outlook

[TOKYO] Australia's dollar held near its highest since early May after a report showed full-time employment in the nation surged last month. New Zealand's dollar tumbled as the central bank's plan to update its economic assessment spurred speculation for a rate cut.

The Aussie headed for a seven-week rally that would be its longest winning streak since 2012, after official data showed full-time jobs jumped by 38,400 in June. The kiwi headed for its steepest weekly drop since May 6 amid speculation the Reserve Bank might seek to weaken the currency. The pound gained before Thursday's Bank of England meeting, with economists expecting policy makers to lower rates.

"The strong growth in full-time employment offsets the weakness in the total employment number and the rise in unemployment rate," David Forrester, a foreign-exchange strategist at Credit Agricole SA's corporate and investment- banking unit in Hong Kong, said of the Aussie data.

"I would expect a bit of a short squeeze in the Australian dollar on this modestly positive number" as the market "was looking for a soft outcome." The Aussie was little changed at 76.19 US cents as of 6:28 am in London, after rising to 76.39. It touched 76.58 on Tuesday, the highest since May 3, when the central bank lowered its benchmark rate to a record 1.75 per cent.

The Australian currency climbed to a one-month high of NZ$1.0576 against its New Zealand counterpart. The kiwi fell as much as 1.1 per cent to 71.97 US cents after the Reserve Bank of New Zealand said it will issue an update on its economic assessment on July 21, reflecting the longer-than-usual gap between the central bank's monetary policy statements as the RBNZ moves to its new release timetable.

"This is sparking speculation the RBNZ may use the platform to warn of the risk from a higher New Zealand dollar on their inflation or economic outlook," said Elias Haddad, currency strategist at Commonwealth Bank of Australia.

Australia's central bank in June predicted "moderate" jobs growth in the months ahead, while hailing recent positive economic data. It left its benchmark cash rate unchanged at this month's policy meeting.

Swaps traders are pricing in about 54 per cent odds of a rate reduction by the RBA in August compared with almost 60 per cent at the start of the month.

The currency has gained against all 16 major peers this month amid the backdrop of strong US hiring, expectations Japan will unveil stimulus and speculation for monetary easing in the UK. The pound rose 0.4 per cent to US$1.3201.

The yen weakened 0.2 per cent to 104.71 per US dollar after earlier strengthening to as high as 103.98, as traders awaited details of Japan's stimulus plans.

"The dollar looks firm around 103 yen and looks to be capped around 105 yen," said Takuya Kanda, a senior researcher at Gaitame.com Research Institute Ltd.

"If the BOE skips easing today and the pound is bought back, it would pressure the yen to weaken while stocks could fall and spark risk aversion, keeping the dollar/yen in ranges."

BLOOMBERG