Thursday in Asia, the Australian and New Zealand dollars registered strong gains against their key counterparts, as labor-market reports were better than economists estimated, adding to evidence the global contraction may be abating.
Australian employers unexpectedly added workers in April and the jobless rate dropped, driving the local currency to a seven-month high against its U.S., European and Japanese counterparts. Against the Canadian dollar, the aussie jumped to a 2-week high during this time.
The number of people employed climbed 27,300 from March, the statistics bureau said in Sydney today. Analysts were looking for a decline of 25,000 jobs. Meanwhile, the unemployment rate came in surprisingly lower at 5.4 percent in April, defying expectations for a 5.9 percent rise following a five-year high of 5.7 percent in March.
Meanwhile, New Zealand's jobless rate rose less than economists expected, driving up the nation's currency to new multi-week highs against the greenback, the yen and the euro. The jobless rate increased to a 6-year high of 5 percent in the first quarter of 2009, compared with the estimate of a 5.3 percent increase.
The employment change was down 1.1 percent compared to the previous quarter, slightly worse than the 1 percent decline that had been forecast after the 0.9 percent increase in Q4. On a year-over-year basis, the employment change was up 0.8 percent - below expectations for a 1.1 percent change following the 0.9 percent increase in the previous quarter.
An improved risk appetite also supported the Australian and New Zealand dollars. Asian stocks jumped today on better-than- estimated jobs reports and an assurance from U.S. Treasury Secretary Timothy Geithner that none of the country's biggest banks are insolvent.
According to a report released yesterday by Automatic Data Processing, Inc. (ADP), private sector employment in U.S. showed another notable decline in the month of April, although the decrease in jobs was much smaller than economists had expected.
The report showed that non-farm private employment fell by 491,000 jobs in April following a revised decrease of 708,000 jobs in March. Economists had expected a decrease of 645,000 jobs compared to the loss of 742,000 jobs originally reported for the previous month.
The Australian dollar, which closed yesterday's trading at 0.7485 against the U.S. currency rose to a new 7-month high of 0.7564 during Asian deals on Thursday. The next upside target level for the Aussie is seen at 0.78.
The aussie-greenback that tumbled to a 5 1/2 -year low of 0.6012 in October 2008 showed choppy trading in the subsequent months. But the Australian currency gained ground in early 2009 and it has advanced more than 20% thus far from a 5 1/2 -year low.
In Asian trading on Thursday, the Australian dollar climbed to 74.67 against the yen. This set the highest point for the aussie since October 2008. On the upside, 80 level is seen as the next likely target for the Australian dollar. The aussie-yen pair was worth 73.60 at yesterday's close.
The Aussie reversed direction against the yen after it touched a 1-month low of 66.88 on April 28. The aussie extended its uptrend this week on better risk appetite following some encouraging economic reports.
Reports released yesterday showed that Australia's retail sales surged up 2.2 percent in March from February, more than four times the increase that economists had forecast, and the trade surplus widened to the second highest on record as farm exports jumped.
Earlier this week, the Reserve Bank of Australia held its key interest rate unchanged as expected at a 49-year low of 3% after cutting it by quarter points on April 7. The central bank has slashed the cash rate by 125 basis points since December 2008 and the official cash rate now stands at its lowest level in 49 years.
RBA Governor, Glenn Stevens said, In assessing whether further reductions in the cash rate are required over the period ahead, the Board will monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity.
The Australian currency has gained more than 10% against the yen after it reached a 1-month low on April 28.
During Asian deals on Thursday, the Australian dollar soared to its highest level in almost 7-months against the euro, hitting 1.7612. This may be compared to yesterday's close of 1.7824. If the Aussie advances further, it may likely target the 1.741 level.
Investors are selling the euro on expectation the European Central Bank will slash interest rates today from the current 1.25% to counter the region's recession.
The ECB is scheduled to announce the decision at 7:45 am ET. Analysts expect the ECB to cut rates by 25bps to 1%, which would be the lowest level since the bank took charge of monetary policy in 1999. The ECB is also expected to announce unconventional policy measures to increase euro zone liquidity.
Against the Canadian dollar, the Aussie strengthened to a 2-week high of 0.8814 in Asian deals on Thursday. If the Aussie edges up further, it may test resistance around the 0.894 level. At yesterday's close, the aussie-loonie pair was quoted at 0.8725.
The aussie-loonie pair jumped to a 7-month high of 0.8942 on April 02. Although the aussie lost 4% thereafter, it rebounded after hitting a 1-month low of 0.8555 on April 28. Since then, the Aussie has appreciated around 3%.
The New Zealand dollar surged up to a 23-day high of 0.5922 against the U.S. currency and 58.46 against the yen in Asian deals on Thursday. If the NZ dollar climbs further, it may likely target 0.598 against the greenback and 60.4 against the yen. The kiwi-greenback and the kiwi-yen pairs were worth 0.5840 and 57.43, respectively at yesterday's close.
Signs the worst of New Zealand's recession may be past prompted investors to bet that Reserve Bank Governor Alan Bollard may have finished cutting interest rates. Last week, the RBNZ cut the benchmark interest rate by half a percentage point to 2.5%. Bollard said he was unlikely to raise the rate before late 2010 and may need to lower it further.
Bollard has reduced the official cash rate by 5.75 percentage points since July to support an economy that is entering is sixth quarter of recession.
During Asian deals on Thursday, the New Zealand dollar jumped to a 24-day high of 2.2478 against the euro. The next upside target level for the kiwi is seen at 2.242. At yesterday's close, the euro-kiwi pair was quoted at 2.2821.
The New Zealand dollar that rose to a weekly high of 1.2716 against the Australian dollar at 7:00 pm ET Wednesday pared gains shortly after the Australian unemployment report was published. The aussie-kiwi pair moved to 1.2861 at 12:05 am ET, compared to yesterday's New York session close of 1.2831. The near term support level for the NZ dollar is seen at 1.291.
In the upcoming European session, the French trade balance and the German factory orders report-both for the month of March are expected.
From U.S., the preliminary non-farm productivity report for first quarter and the weekly jobless claims report are due at 8:30 am ET.
The Federal Reserve Chairman Ben Bernanke is due to offer the opening keynote address at the Chicago Fed's Conference on 'Bank Structure and Competition' at 9:30 am ET. Bernanke's address is to be followed by a speech by FDIC Chair Sheila Blair at 1:10 PM ET.
Additionally, the U.S. Federal Reserve is expected to release its monthly consumer credit report at 3 pm ET. Consumer credit for March is likely to show a decline of $3.3 billion.
Investors also look forward to the release of the stress tests results conducted on as many as 19 major U.S. banks. According to media reports, the government stress tests of the nation's leading financial firms have determined that JP Morgan, Goldman Sachs, American Express and Bank of New York Mellon will not need additional capital. At the same time, reports have suggested that Bank of America, Citigroup and Wells Fargo will be asked to raise additional capital.
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