NEWS / Foreign Exchange

USD at 6-week high against yen

NZD consolidates over long weekend

The NZD spent much of Thursday trading sideways around 0.7200 with little in the way of local economic data to provide the market with any direction. Some profit taking was noted from the 0.7225 high on the back of Japanese selling, which also saw the NZD sell off against the JPY, after briefly touching above 86.00 earlier. Buying pressure continued into the overnight session with the currency holding onto 0.7250 on Friday; this was met with selling late in the day in the wake of stronger-than-expected US payrolls data and the currency opens the week trading comfortably around 0.7200.

AUD remains firmly entrenched above 0.8100

The AUD maintained a firm tone on Thursday on the back of yield related buying. However some profit taking was noted on Asian profit taking and squaring of positions ahead of the long weekend. A short rally towards 0.8200 was noted on Friday ahead of the US Jobs data, however the currency gave back all it gains after the strong numbers surprised the market. The AUD opens steady this morning at 0.8170, similar to last weeks closing level.

USD at 6-week high against yen

The USD extended Friday??™s US payrolls induced rally in thin trading conditions on Monday as European markets remained closed. Against the yen the dollar climbed to a six week high of 119.39 but failed to push higher with the market wary of the BoJ??™s policy decision today and the G7 meeting on Friday. The euro was relatively subdued and traded in a fairly tight range, however remained supported above a rising trendline going back three weeks. GBP was sold throughout the day to dip below 1.9600 before finding support to finish the session around 1.9625.

US Mar non-farm payrolls up 180k, jobless rate 4.4%. Almost every detail was up-beat: the revisions, for the ninth month running, were to the upside, this month worth 32k; the household survey, after two flat months, bounced back with a 335k jump, the jobless rate was the lowest since 2001; hourly earnings posted a solid 0.35% gain, and with hours worked up a rapid 0.6%, and Feb??™s hours decline revised away, that paints a very solid household income picture which should be supportive of consumer spending.

US initial jobless claims rose 8k to a four week high of 321k but remain nearly 40k below their poor weather-boosted 360k peak back in February. So the latest result is mostly likely just weekly noise. In the prior week, continuing claims continued to trend lower.

Canadian jobs growth up 55k in Mar. Employment continues to surprise to the upside! March may have benefited from warmer weather and the end of the rail strike, but even so the data serve to remind us that the economy is in better shape than its larger southern neighbour. Also, the not seasonally adjusted Ivey PMI jumped in March, as it always tends to do, but it was a decent enough 7 pt gain to suggest that the Canadian economy is doing quite well.

German factory output rose 0.9% in Feb. IP continues to purr along, not having posted a decline since Oct. Annual growth is running at 7.7% yr, and the surge in orders in Feb suggests further IP gains ahead.

The BoE left rates on hold at 5.25% following last week??™s monetary policy committee meeting. Some evidence that the three rate rises over the past eight months might be impacting, along with a clear softening in wages pressures, would have been the main factors behind the on hold decision. Risks are still biased towards a further move, perhaps as early as May, though that is not our forecast.

UK Mar house prices surged further on the Halifax measure, enough to lift annual growth back above 10% yr for the first time since early 2005. However the manufacturing sector continued to contract in Feb, despite recent positive data from the private sector surveys.