$NZ at 30-month high against greenback

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The New Zealand dollar retreated from a 30 month high today ahead of the release of US monthly non-farm payrolls data but it is expected to remain well bid and to test US80c in the future.

The NZ dollar was at US79.27c at 5pm, little changed from the US79.57c at 8am but below the US79.75c it rose to on Thursday night. The US80c level is seen as a psychological barrier but US dollar weakness remains the overwhelming trend in the market. The NZ dollar's all-time high since floating is US82.13c in February 2008. The currency has only been above US80c twice since floating in 1984.

It has been a week in which everything went the NZ dollar's way with strong employment data released as the greenback slumped broadly in response to the United States Federal Reserve's decision to buy US$600 billion of US Treasuries over the next eight months.

"While the labour market data this week - data quality issues aside - provided a positive surprise, with wage inflation on the ascent and solid employment growth in the third quarter, it was again a case of `labouring on' for the housing market," said Phillip Borkin, economist at Goldman Sachs New Zealand Ltd. Data from Barfoot & Thompson confirmed housing activity in Auckland was weak.

Data due next week is largely second and third-tier, including electronic card transactions, the REINZ housing market report and BNZ-Buisness New Zealand manufacturing index.

Economists expect that the US economy added 60,000 jobs in October after 95,000 were lost in September.

The Australian dollar is trading at 28 year peaks and is above parity with the US dollar.

But the NZ dollar pushing to its highest level in more than seven weeks against the Australian dollar around A78.60c on Thursday night from A78.06c at 5pm. By 8am the NZ dollar had fallen back to A78.36c and by 5pm it was A78.09c.

At 8am the NZ dollar was also around its highest level in about seven weeks at 0.5599 euro and by 5pm it was 0.5582 from 0.5552 at the same time yesterday.

The NZ dollar was at 64.06 yen at 5pm from 63.42 yen at the same time yesterday.

The trade weighted index rose to 69.35 at 5pm from 68.92 yesterday.

The Fed's commitment to open-ended purchases of Treasuries, implying low funding costs, also brings into focus an expected increased use of the US dollar in carry trades in which the US dollar is used to fund purchases in commodities, emerging markets and higher-yielding currencies.

"What you achieve with quantitative easing is that you signal to investors not to buy US government securities, take the money elsewhere, which in turn will weaken the (US) dollar and spur economic growth," said Axel Merk, president and portfolio manager at Merk Investments in Palo Alto, California.

- NZPA