Kiwi tumbles on jobs report

Wednesday, 13 February, 2013

The Kiwi plunged 1.5 cents vs. the USD yesterday after the latest unemployment data showed a huge 23,000 jobs lost in Q4 of 2012. Whilst the unemployment rate fell (down from 7.3% to 6.9%) this was driven by a massive decline in the total workforce as the baby boomers start to retire and drop out of the workforce. It was this large fall in employment which caught the market by surprise and saw the Kiwi drop sharply. The data confirms a very soft final six months to 2012 and will force the Reserve Bank to revise down its growth and inflation forecasts for this year and leave them on hold well into 2014.

Australia also had jobs data out yesterday, which showed the unemployment rate staying steady at 5.4%, with a drop in full-time jobs offsetting a rise in part-time. The participation rate dropped further, down to 65.2%. This is the number of people able to work compared to the total population. The Aussie dollar has slipped below 1.03 vs. the USD as investors continue to cash up their Asian related bets. The Aussie has been used as a proxy for investing in Asia due to Australia’s strong trade links to China, but as the Yen weakens and all Asian currencies look to fall to protect their exports, the Aussie dollar is being sold to reflect the general weakness in currencies across the region.

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