NZ dollar tumbles after strong US jobs data

File photo / NZ Herald

The New Zealand dollar fell to its lowest in more than three weeks as the greenback soared after better-than-expected US jobs data boosted speculation the US Federal Reserve may raise interest rates as early as June.

The kiwi fell to 73.40 US cents and was trading at 73.47 cents at 8am in Wellington, from 73.60 cents at the New York close and 74.93 cents at 5pm in Wellington on Friday.

The trade-weighted index declined to 77.17 from 78.14 on Friday.

The dollar index, which measures the greenback against a basket of currencies, jumped to its highest in 11 1/2 years after a report showed the US added 295,000 jobs in February, ahead of the 240,000 expected and the 12th straight month the economy added more than 200,000 jobs.

The US unemployment rate fell to 5.5 per cent, the lowest in more than six years and at the top of a 5.2 per cent to 5.5 percent range of what many Fed officials consider to be full employment.

"The market's response to the much awaited US payrolls report was abrupt," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note.

"The US dollar strengthened sharply.

"The combination of a very strong headline payrolls number and fall in the unemployment rate proved irresistible, despite a modest decline in the rate of growth in average hourly earnings.

"In our mind this will provide sufficient ammunition for the US Fed to remove 'patience' from their statement at their next meeting and undertake an initial rate hike in June."

The next meeting of the Federal Reserve Open Market Committee is March 17-18.

BNZ says the kiwi has support today at 73.10 US cents.

It expects the local currency to decline to 70 US cents by the end of the year as US rate hikes lure investors to the greenback.

In New Zealand today, quarterly manufacturing sales data is released at 10:45am.

Later this week, the Reserve Bank will review interest rates on Thursday.

The New Zealand dollar slipped to 95.17 Australian cents from 95.98 cents on Friday, declined to 88.70 yen from 89.92 yen, weakened to 48.83 British pence from 49.13 pence and edged lower to 67.79 euro cents from 67.94 cents.