NZ dollar little changed near 17-month low

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The New Zealand dollar was little changed, holding near a 17-month low on a trade-weighted basis before employment data that may point to an uptick in inflation.

The kiwi traded at 68.42 US cents as at 8am in Wellington from 68.45 cents late yesterday. The trade-weighted index was at 72.62 and earlier touched 72.51, the lowest since the end of May last year, from 72.61 yesterday.

The kiwi dollar sank yesterday after reports showed business confidence turned negative in October and building permits fell in September, while Prime Minister Jacinda Ardern announced a ban on foreigners buying existing homes in New Zealand starting early next year. The currency has retreated since the new coalition government was formed but may get a boost today with employment figures expected to show rising wage pressures, adding to the case for the Reserve Bank to begin projecting higher interest rates in its monetary policy statement next week.

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"The data was further fuel for those looking for reasons to sell the NZD as we've consistently seen since the election," said Jason Wong, currency strategist at Bank of New Zealand, in a note. Today's employment data "will help set the tone for next week's RBNZ MPS, which already also has to consider the weaker NZD, higher oil prices, a much higher minimum wage track over coming years, much easier fiscal policy and the higher starting point for inflation."

The unemployment rate probably fell to 4.7 per cent from 4.8 per cent in the third quarter while employment grew 0.8 per cent and private sector ordinary-time wages - which have shown only tepid increases in recent years - grew 0.7 per cent from 0.4 per cent in the second quarter.

In its August MPS, the Reserve Bank forecast third-quarter inflation of 0.2 per cent for an annual rate of 1.6 per cent but changes since then include a TWI that's 7.5 per cent lower than the 78.5 average level it projected for the third quarter, a change that heralds a return to imported inflation. The next MPS is published on November 9.

The kiwi fell to 51.48 British pence from 51.84 pence and traded at 58.71 euro cents from 58.83 cents. It rose to 89.30 Australian cents from 89.15 cents, traded at 4.5382 yuan from 4.5359 yuan and gained to 77.76 yen from 77.47 yen.