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Weak US data helps kiwi end week higher

NZ Newswire logoNZ Newswire 2/09/2016 Jonathan Underhill

The New Zealand dollar gained after weaker-than-expected US manufacturing data although US non-farm payrolls overnight is expected to set the kiwi's direction from here, at least in the short term.

The kiwi rose to 72.88 US cents from 72.51 cents on Thursday. The trade-weighted index gained to 77.63 from 77.43.

Market consensus is that the US economy added 180,000 jobs last month, down from 255,000 in July but still a sign of a relatively robust labour market, a key consideration for the Federal Reserve in deciding whether the world's biggest economy is sturdy enough to sustain higher interest rates.

Federal Reserve chairwoman Janet Yellen and vice chairman Stanley Fischer talked up the prospects of interest rate hikes while saying it was dependent on a flow of strong economic indicators.

"It's all going to be about the payrolls tonight - a lottery as always," said Imre Speizer, senior market strategist at Westpac.

"Every trader and their dog will be glued to that number and if it is more or less then they will buy or sell the US dollar."

The kiwi gained earlier following a weaker-than-expected ISM manufacturing report.

Traders are pricing in just a 12 per cent chance that the Reserve Bank will cut interest rates at its next meeting on Sept. 22 but the odds of a 25 basis point cut by the monetary policy statement on Nov. 10 are currently around 77 per cent.

The New Zealand dollar rose to 96.36 Australian cents from 96.13 cents on Thursday. It increased to 75.27 yen from 74.89 yen and gained to 4.8668 yuan from 4.8460 yuan.

It was little changed at 65.03 euro cents from 65.04 cents and fell to 54.84 British pence from 55.16 pence after the UK Markit PMI manufacturing index for August printed at 53.3 against expectations of 49.

New Zealand's two-year swap rate was unchanged at 1.99 per cent and 10-year swaps rose 1 basis point to 2.40 per cent.


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