Dollar on firm ground, kiwi jolted by jobs shock

By Anirban Nag

SYDNEY (BestGrowthStock) – The U.S. dollar was on a firm footing on Thursday while the New Zealand dollar dived after a sharp jump in unemployment, dragging other growth-linked currencies along with it.

The New Zealand dollar fell to its lowest in five months, dropping to as low as $0.6965, from $0.7070 late on Wednesday, after data showed the country’s jobless rate rising to a 10-year high.

That shocked investors and led markets to pare back chances of a interest rate hike in the coming months.

“It will likely reinforce Governor (Alan) Bollard’s resolve to stay on the sidelines until mid year,” said Su-Lin Ong, senior economist at RBC. “We still expect the tightening cycle to begin in the second quarter, but now think this is more likely in June, rather than April.”

The euro was also on the defensive, slipping to $1.3888, from $1.3894 late in New York on Wednesday, with market talk of option barriers and stop-losses lurking below $1.3850.

The single currency continues to be on shaky ground on fresh fears that Portugal could join Greece as the next country to face fiscal problems.

The cost of insuring Portuguese government bonds against default widened after Portugal’s debt agency cut its planned T-bill placement to 300 million euros from the planned 500 million, while yields spiked higher compared with January’s placement.

Market focus now turns to the European Central Bank (ECB) rate decision later in the day. The ECB is widely expected to keep rates unchanged at its meeting on Thursday as financial woes in Greece, Portugal and Spain endanger the currency bloc’s recovery.

All that adds to the view that the U.S. will recover at a faster pace than the eurozone, a belief that is likely to see the dollar gain further ground.

The dollar index (Read more about the global trade. ) (.DXY: ) was up at 79.41, completing a bullish outside day reversal. The move suggests the index was poised to move higher with shortr-term resistance seen near its recent high of 79.534 and then around 80.06, which is a 38.2 percent retracement of the fall from 89.62 to 74.17 in 2009.

The dollar was firmer on the yen, at 90.98 yen, having hit a two-week high of 91.28 yen on Wednesday helped by better economic data out of the United States and higher U.S. yields.

U.S. data on Wednesday showed signs of a stabilization in the jobs market while the Institute for Supply Management’s index of non-manufacturing companies rose to 50.5, from 49.8 in December.

All that bodes well for the nonfarm payrolls numbers due on Friday. A Reuters poll of top 20 forecasters estimated 8,000 jobs were added to the economy. That compares with a forecast of 5,000 jobs being added in a larger survey of 80 economists.

The Bank of England’s monetray policy meeting will also be the focus on Thursday. The BOE is expected to halt its quantitative easing program, although interest rates are likely to be held at 0.5 percent.

Sterling was marginally higher at $1.5903, from $1.5897 late in New York on Wednesday, when it lost nearly 0.5 percent.

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(Editing by Wayne Cole)

Dollar on firm ground, kiwi jolted by jobs shock