KEY POINTS:
A surprisingly strong rise in fourth quarter wages gave the New Zealand dollar a lift today, as the data increased the likelihood of a rate rise on March 8.
By 5pm, the kiwi had risen to US68.41c from the US68.22c close on Friday. Against the Aussie, it was at A88.45c from Friday's A88.29c close.
After the Reserve Bank's warning last month it would raise rates if there were further signs of economic strength, today's wage and employment data showed a higher-than-expected increase in workers' pay.
Salary and wage rates (including overtime), as measured by the Labour Cost Index, increased 3.2 per cent in the year to the December 2006 quarter, more than the 2.9 per cent expected in a Reuters survey.
The quarterly private sector wage rise of 0.9 per cent was higher than the Reserve Bank's 0.7 per cent forecast, and followed a similar rise the previous quarter.
On the release, the kiwi rose from about US68.15c to US68.45c.
"Those numbers were quite significant, they were well above expectations and the growth rate - the measure that the RBNZ prefers - rose 0.9 per cent, which is a very strong quarterly rise," said Westpac currency strategist Michael Gordon.
"It's very difficult to see the Reserve Bank taking a sanguine view of those numbers and I think it really raises the odds of a March rate hike," he said.
The interest rate market was pricing in an 80 per cent chance of a rate rise in March, and a 100 per cent chance of a rise in April if the Reserve Bank holds next month.
That was up from a 60 to 70 per cent risk last week.
The focus now was on Thursday's Household Labour Force Data, the official employment measure.
Also of note is the Reserve Bank of Australia's meeting tomorrow, at which interest rates are expected to remain steady at 6.25 per cent.
The markets are closed tomorrow for Waitangi Day, although many people had taken today off as well.
Reuters currency rates:
5pm today 5pm Friday
NZ dlr/US dlr US68.41c US68.22c
NZ dlr/Aust dlr A88.45c A88.29c
NZ dlr/euro 0.5288 0.5241
NZ dlr/yen 82.66 82.39
NZ dlr/stg 34.82p 34.69p
NZ TWI 68.21 67.91
Australian dollar US77.35c US77.26c
Euro/US dollar 1.2939 1.3020
US dollar/yen 120.83 120.74
- NZPA