Aussie, Kiwi Dollars Fall Before U.S. Jobs Report on Fed Outlook

Australia’s dollar fell from a more than two-week high before an ADP Research Institute report that may show companies in the U.S. added jobs last month, reinforcing the case for the Federal Reserve to reduce stimulus.

New Zealand’s currency also declined before tomorrow’s U.S. Labor Department jobs report, which may fuel expectations for the Fed to reduce its bond purchases at its meeting on Sept. 17-18. The Aussie held three days of gains against the euro and pound before The European Central Bank and the Bank of England conclude policy meetings today.

“A large ADP surprise could move the Aussie as some in the market see it as an indicator of the official payrolls report,” said Imre Speizer, a market strategist in Auckland at Westpac Banking Corp. (WBC) “Because it’s got the tapering linked into it, this is going to be one of the most important payrolls numbers we’ve seen in a long time.”

The Aussie fell 0.3 percent to 91.50 U.S. cents as of 4:42 p.m. in Sydney after earlier touching 91.88, the most since Aug. 19. It was little changed at 69.47 euro cents after rising 3.3 percent in the past three days. It traded at A$1.7068 per pound from A$1.7036 yesterday.

New Zealand’s kiwi declined 0.4 percent to 78.76 U.S. cents and 78.57 yen.

Forward Guidance

The ADP Research Institute will probably say today that U.S. companies added 182,000 jobs last month, following a 200,000 increase in July, according to the median estimate in a Bloomberg survey. The Labor Department is forecast to say tomorrow that payrolls rose by 180,000 in August while the jobless rate held at 7.4 percent, a separate poll showed.

A Bloomberg survey of economists last month showed that 65 percent expected that the Fed will start unwinding its $85 billion a month bond-buying program at this month’s meeting.

Australia unexpectedly reported a trade deficit in July as imports rose 4 percent from the previous month while exports were little changed, the statistics bureau said today. The deficit was A$765 million ($700 million) in July, compared with the median estimate for a A$100 million surplus in a Bloomberg News survey. Merchandise exports to China, Australia’s largest market, rose to A$7.8 billion from A$7.7 billion.

“Better data in the U.S. suggests more positive signs for the global economy, so while the Aussie is not going to race away against the U.S. dollar, it should outperform on the cross rates,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. (CBA) The ECB and BOE “will reinforce their forward guidance so that will see the euro and sterling underperform, but the current sentiment in the market should see the Aussie and kiwi outperform.”

Global Sell-off

BOE Governor Mark Carney introduced forward guidance last month, saying the Monetary Policy Committee won’t consider raising its key rate until unemployment falls to 7 percent. The ECB’s July introduction of forward guidance followed signs that the Fed will start unwinding its $85 billion a month bond-buying program this year. That had sparked a global sell-off in bonds, driving yields higher in stressed economies including Spain and Portugal.

Australia’s 10-year bond yield rose as much as six basis points to 4.08 percent, the most since Aug. 22. The three-year rate reached 2.93 percent, the highest since July 8. A basis point is 0.01 percentage point.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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

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