The New Zealand dollar fell to a five-week low against its Australian counterpart as rising unemployment at home and stronger job prospects across the Tasman stoked talk the gap in interest rates won't narrow any time soon.
The New Zealand dollar fell to 81.57 US cents from 81.67 cents at 5pm in Wellington yesterday. The kiwi fell to 78.22 Australian cents, near the lowest since September 6, from 78.49 cents.
New Zealand's unemployment rate unexpectedly rose to 7.3 per cent in the third quarter, while in Australia, the economy added 10,700 jobs last month, beating expectations. A weak jobs market gives Reserve Bank governor Graeme Wheeler more scope to cut the official cash rate from a record low 2.5 per cent, widening the gap with Australia's 3.25 per cent rate.
"The employment figures were a bit of a shock and increase the odds of an interest rate cut in New Zealand," said Dan Bell, currency strategist at HiFX. Wheeler is more likely, though, to try to talk rates down while there's still a prospect the RBA will actually cut rates, he said.
Stocks fell overnight, with the Standard & Poor's 500 Index down 0.8 per cent, amid more gloom from Europe, where the central bank kept its key rate unchanged and said there are no signs of a pickup in economic growth.
