Australian, Kiwi Dollars Snap Gains Before U.S. Jobs Data

The Australian and New Zealand dollars failed to extend gains from yesterday against the greenback before U.S. jobs data that may add to the case for the Federal Reserve to pare back stimulus.

The Aussie rose against most of its major peers yesterday as global stocks gained after the European Central Bank and Bank of England indicated looser monetary policy. Australia’s currency was 0.4 percent from the lowest since November 2008 against New Zealand’s dollar.

“The Aussie managed to emerge a little stronger after the ECB and Bank of England both indicated that they were inclined to loosen policy as needed,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. The U.S. payrolls data is “always a lottery as far as the number that hits the screens. The kiwi has still been a much stronger performer than the Aussie in recent weeks, but on the day it’ll just watch the global mood.”

Australia’s dollar was little changed at 91.43 U.S. cents at 4:45 p.m. in Sydney from yesterday, when it climbed 0.7 percent. It touched 90.37 on July 3, the lowest since September 2010. The Aussie added 0.2 percent to 91.68 yen. For the week, Australia’s currency is little changed against the greenback and has gained 1.2 percent versus the yen.

The Aussie traded at NZ$1.1699 from NZ$1.1678 yesterday, after dropping to NZ$1.1653 on July 3, the weakest since November 2008. The kiwi dollar declined 0.2 percent to 78.19 U.S. cents from yesterday, and was set for a 1 percent weekly gain. It was little changed at 78.40 yen today.

Fed Tapering

The Labor Department will probably say the U.S. added 165,000 jobs in June after boosting nonfarm payrolls by 175,000 in the prior month, according to the median economist forecast in a Bloomberg News survey before today’s report. The jobless rate likely declined to 7.5 percent from 7.6 percent in May.

Fed Chairman Ben S. Bernanke said on June 19 that U.S. policy makers may begin slowing bond purchases this year if the economy achieves sustainable growth.

ECB President Mario Draghi said yesterday in Frankfurt the central bank planned to keep the euro area’s main refinancing rate at a record-low 0.5 percent or even lower for an “extended period” and that it was injecting a “downward bias in interest rates for the foreseeable future.”

The BOE said in a statement yesterday in London the “implied rise in the expected future path of bank rate was not warranted by the recent developments in the domestic economy” after officials left the bank’s benchmark rate and bond-purchase program unchanged.

Shares Gain

The MSCI World Index of shares rose 0.5 percent yesterday, while the Stoxx Europe 600 Index surged 2.3 percent. MSCI’s Asia Pacific Index increased 0.6 percent today.

The Aussie slid to an almost three-year low after Reserve Bank of Australia Governor Glenn Stevens said on July 3 the central bank board deliberated for a long time before its decision to hold the key interest rate unchanged at a record low 2.75 percent the day before. Deputy Governor Philip Lowe said yesterday the market misinterpreted the governor’s comments.

Swaps data compiled by Bloomberg show traders see a 48 percent chance the RBA will lower its key rate to 2.5 percent at its next meeting on Aug. 6, compared with a 30 percent likelihood indicated a week ago.

The yield on Australia’s 10-year government bond rose three basis points, or 0.03 percentage point, to 3.82 percent.

-- Editors: Garfield Reynolds, Rocky Swift

Before it's here, it's on the Bloomberg Terminal.