Aussie Gains Versus Kiwi on Diverging Employment Reports

Australia’s dollar gained against New Zealand’s for a third day after data showed the bigger nation’s payrolls rebounded in July while unemployment rose in the smaller country.

The so-called Aussie reached its strongest in more than four months versus the greenback as regional shares climbed following Chinese inflation data that may offer room for further easing in Asia’s biggest economy. Demand for New Zealand’s dollar was tempered after Reserve Bank Governor Alan Bollard said that so-called carry trades in currencies can be “problematic” for the nation’s economy.

The Australian jobs data “was, on balance, better than expected,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “We expect the Aussie-kiwi cross to outperform today.”

Australia’s currency climbed 0.4 percent to NZ$1.3021 at 4:13 p.m. in Sydney from the close in New York yesterday, after earlier touching NZ$1.3028, the highest since July 26. The Aussie reached $1.0613, the strongest since March 20, before trading at $1.0590, 0.2 percent higher than yesterday’s close. It gained 0.3 percent to 83.14 yen.

The New Zealand dollar, nicknamed the kiwi, lost 0.3 percent to 81.33 U.S. cents after weakening 0.5 percent over the previous two days. It declined 0.1 percent to 63.85 yen.

Ten-year government bond yields in Australia gained two basis points, or 0.02 percentage point, to 3.34 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped seven basis points to 2.76 percent. The MSCI Asia Pacific Index of regional stocks advanced 0.8 percent, rising for a fourth day.

Australian Employment

The number of people employed in Australia rose by 14,000, the statistics bureau said in Sydney today, exceeding the 10,000 increase predicted by the median economist estimate in a Bloomberg News survey. The jobless rate fell to 5.2 percent from a revised 5.3 percent in June.

China’s consumer prices climbed 1.8 percent in July from a year earlier while the producer-price index dropped 2.9 percent, the National Bureau of Statistics said today. China, Australia’s biggest trading partner and New Zealand’s second-largest export destination, also reported today that retail sales growth slowed and industrial production decreased.

“That is pretty benign growth in prices, and that obviously leaves the door open to monetary accommodation, which is positive for the Aussie,” ANZ’s Salter said.

The kiwi fell for a third day versus the greenback after a report that showed the jobless rate rose to a two-year high.

Jobless Rate

Statistics New Zealand said in Wellington that employment fell 0.1 percent in the second quarter from the first when it rose 0.4 percent. Economists surveyed by Bloomberg News expected a 0.4 percent gain. The jobless rate increased to 6.8 percent from 6.7 percent in the first quarter, exceeding the median economist estimate for 6.5 percent.

“This is very negative for the New Zealand dollar,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC) “The kiwi was already in the process of starting to correct downward over the past two days, so this will accelerate this downward correction.”

New Zealand Prime Minister John Key signaled this week the onus is on the central bank and private investors to aid economic growth as he seeks to eliminate a budget deficit.

New Zealand’s currency is vulnerable to carry trade-related capital flows from nations that have cut interest rates to zero, making it more difficult to set policy, according to RBNZ’s Bollard.

Carry Trades

“As a small open economy, New Zealand has often seen the effects of carry trades on the exchange rate,” Bollard said in notes of a speech. “This can be distortionary and problematic, because an economy relies on its exchange rate as a signaling price.”

New Zealand’s dollar has climbed 4.7 percent this year, the best performance along among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

Bollard has held the official cash rate at 2.5 percent since March 2011 while rates in Japan and the U.S. are as low as zero, attracting investors to the South Pacific nation’s higher- yielding assets.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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