WELLINGTON/SYDNEY: The New Zealand dollar slipped on Thursday after an unexpected jump in the country's jobless rate prompted markets to price in the risk of an interest rate cut, while jitters about the global economic recovery kept the Australian dollar pinned down.
The kiwi fell nearly half a percent to a low of $0.8040, its weakest since late January, after data showed New Zealand's unemployment rate rose to 6.7 percent in the first quarter, from 6.3 percent.
Analysts had expected an unchanged reading, but the data series offered a mixed picture of the jobs sector, as the actual number of jobs created beat expectations, up 0.4 percent from forecast 0.3 percent.
Still, the kiwi fell across the board, hitting a near three-month low against the yen of 64.46 yen, and a six-week low against the Aussie and the euro.
It later clawed back some losses, trading around $0.8065 in late local trade.
Trading was thin with Japanese markets on holiday and investors cautious ahead of the European Central Bank's (ECB) rate decision.
Thursday's jobs data raised speculation of a rate cut at the Reserve Bank of New Zealand's policy review next month, but analysts see a bigger likelihood that the central bank will instead hold back from raising rates until next year.
The weak jobs data boosted New Zealand government bond prices, pushing yields 10 basis points lower at the short end of the curve.
Traders said the data also prompted some domestic investors to lock in bets for further weakness in the kiwi, which has been under selling pressure this week after a fall in milk prices soured sentiment for the commodity-linked currency.
But others said a lack of significant follow-through selling suggested many investors still saw the currency as an attractive investment, given that at 2.5 percent, New Zealand rates are higher than many major countries.
Technical support around $0.8065, where the kiwi's 200-day moving average lay, shielded the currency from further losses on Thursday, but some traders saw the risk of more losses if US jobs data due on Friday came in weaker than expected.
"We could test below $0.8000 if we see a weak US payrolls figure on Friday," said Andrew May, a trader at CMC Markets. "The kiwi really is at the mercy of external factors."
AUSTRALIAN DOLLAR UNDER PRESSURE
The Australian dollar last traded at $1.0300, versus $1.0328 in New York as concerns about the health of the global economy grew after weak European and US data.
It has already been under pressure after the Reserve Bank of Australia (RBA) delivered on Tuesday an aggressive 50 basis-point rate cut. It has fallen 1.8 percent so far this week.
Still, some thought the Aussie should be a lot lower given the Australian economy has disappointed lately.
"I think it is incredibly overvalued... While prospects for the global economy continue to diminish, the Aussie seems reluctant to come back to earth," said David Scutt, a trader at Arab Bank Australia.
"It's more a consequence of how bad the other economies are going, rather than how good we are," he said, while adding the Aussie belongs way below parity.
Key support is seen around $1.0285, a level it has tried to break twice this week. Traders cited exporters bids near $1.0250-85. A break below $1.0226 would open the way to the Jan. 9 trough of $1.0145.
Interbank debt futures imply a 60 percent chance of a cut to 3.50 percent in June and a total of around 73.5 basis points in easing by year end.
That is one reason Australian debt futures have been stellar-performers of late. The three-year futures contract gained 0.06 points to 97.150, very near 97.220, its highest since 1992.
The 10-year contract added 0.075 points to 96.485, close to an all-time high of 96.530 hit this week.
The Australian dollar also struggled against the Japanese currency. It was at 82.62 yen, not far from three-month lows hit on Tuesday. It even lost ground against a soggy euro, which edged up to A$1.2757, from A$1.2728.