NZ dollar declines as US unemployment, Euro elections loom   4 May 2012

Article - BusinessDesk

NZ dollar declines as US unemployment, Euro elections loom

By Paul McBeth

May 4 (BusinessDesk) - The New Zealand dollar is poised for a 2.7 percent decline over the week as investors prepare for US jobs figures and general elections in France and Germany over the weekend.

The kiwi fell to 80.01 US cents at 5pm from 82.21 cents last week. It's little changed from 79.91 cents at 8am and down from 80.58 cents yesterday. The trade-weighted index fell to 71.32 from 71.79 yesterday, and is poised for a 2 percent weekly decline.

Westpac Bank economists expect the kiwi to fall to 78 US cents after an unexpectedly high unemployment rate of 6.7 percent prompted traders to quit the kiwi, which pushed it out of a 2 US cents trading band that it had been stuck in for almost nine weeks.

Investors are waiting on non-farm payrolls data on Friday in the US, which are expected to show the world's biggest economy added 160,000 jobs last month. If it comes in below forecasts, traders will probably sell higher-yielding assets such as equities and the kiwi dollar.

If payrolls disappoints, "it's all go for equities and the kiwi - whichever way equities go" dictates direction for the New Zealand dollar, said Imre Speizer, market strategist at Westpac Banking. "We have a 78 US cents target" for the kiwi until at least June and maybe into September, he said.

Analysts will also be looking at the outcome of the French and Greek general elections this weekend, with both nations' governments important to shore up the Euro-zone's stability. Greece agreed to major austerity measures to secure a bail-out by its Euro-zone partners and the International Monetary Fund, while France is the second-biggest economy in the continent.

Speizer said the French election is probably the more important of the two, because if it's "not going to see eye-to-eye with Berlin, it will impact on the Euro-zone as a whole."

The minutes from this week's Reserve Bank of Australia meeting showed a slower growth track of 3 percent for the year, and a more benign inflation outlook. The central bank unexpectedly cut the target cash rate half a percentage point to 3.75 percent on Tuesday.

The kiwi fell to 77.99 Australian cents from 78.19 cents yesterday, and was little changed at 64.66 yen from 65.65 yesterday. It fell to 60.83 euro cents from 61.33 cents yesterday, and declined to 49.39 pence from 49.81 pence.

(BusinessDesk)

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