RTTNews - Thursday in Asia, the New Zealand dollar plunged to a 2-day low against its major counterparts as New Zealand's unemployment rate jumped by the highest amount in nearly 21 years in the second quarter, reaching a nine-year high.
Statistics NZ reported today that the nation's jobless rate increased to 6.0 percent, a full percentage point higher that the rate in Q1. Most economists had forecast a jobless rate of 5.7 percent.
It marked the biggest quarterly increase in joblessness since the September 1988 quarter.
The survey showed the jobless rate has increased in each of the past six quarters, from a low of 3.5 percent in the quarter ended December 2007.
Statistics NZ said the number of unemployed persons increased 20.6 percent in the June 2009 quarter. Altogether, 138,000 residents were unemployed, a 10-year high.
Rising unemployment will curb consumer spending and adds to signs New Zealand faces a slow climb out of recession over the coming year.
On July 22, the Reserve Bank of New Zealand decided to keep interest rates unchanged at a record low of 2.50%, while RBNZ Governor Alan Bollard said that despite signs of a leveling off in economic activity, the economy remains weak.
We continue to expect to see a patchy recovery get underway toward the end of the year, but it will be some time before growth returns to healthy levels, Bollard said.
The Bank also hinted that interest rates could go even lower, if policy makers felt the economy needed further stimulus.
Prime Minister John Key said last month that the economy may be in its last quarter of recession, but the jobless rate is likely to keep rising for another year and the nation is by no means out of the woods.
Against the US dollar, the New Zealand currency edged down to a 2-day low of 0.6699 during early Asian deals on Thursday. This may be compared to yesterday's 10-month high of 0.6766. If the kiwi-dollar pair falls further, 0.663 is seen as the next target level. The pair closed Wednesday's North American session at 0.6735.
U.S. economic reports released yesterday added to doubts the recession in the world's largest economy is easing.
A report from the Institute for Supply Management on activity in the service sector in the month of July showed that the pace of contraction in the sector unexpectedly accelerated from the previous month.
The ISM said its index of activity in the sector edged down to 46.4 in July from 47.0 in June, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to rise to 48.0.
A separate report released by payroll processor Automatic Data Processing (ADP) showed that private sector employment saw another notable decline in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008.
ADP said non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.
Meanwhile, the U.S. Commerce Department revealed that factory orders rose 0.4 percent in June, surprising economists, who had expected orders to drop 0.8 percent.
During Thursday's early Asian trading, the New Zealand currency slipped to a 2-day low of 63.65 against the Japanese yen, moving from Wednesday's new multi-month high of 64.51. On the downside, 62.9 is seen as the next target level for the kiwi. The kiwi-yen pair closed yesterday's deals at 63.98.
Japan's leading index increased to 79.8 in June from 76.9 in the preceding month, a preliminary report by the Cabinet Office said today. Economists expected the index to be 79.7. The leading index has now increased for the fourth consecutive month in June.
The coincident index climbed to 87.8 from 87.1 in May. This is the third consecutive month the index has risen. Economists expected the index to come in at 88.1.
The New Zealand dollar that closed Wednesday's New York deals at 1.2498 against the Australian currency slipped to 1.2594 during today's early Asian deals. This set a 2-day low for the kiwi. The aussie-kiwi pair is currently trading at 1.2581 with 1.263 seen as the next target level.
The Australian dollar rose as the Australian economy continued to show more signs of recovery as today's unemployment rate came much better than forecasts, giving signs of a healing labor sector that used to represent a major problem for the economy in the way out of the crisis.
The Australian Bureau of Statistics said in a report that the nation's jobless rate remained at 5.8 percent in July, the same level as the month before. Economists had expected the unemployment rate to increase to 6.0 percent. The bureau said in seasonally adjusted terms, overall employment increased by 32,200 to 10,793,600.
It meant New Zealand leap-frogged Australia's unemployment figure, which was at 5.8% in June.
Since 2003, New Zealand's rate has generally been around a percentage point lower than Australia's. New Zealand has now been in recession for well over a year.
Social Development and Employment Minister Paula Bennett said the unemployment rise was a concern. But despite the larger than expected rise in the number of people out of work, New Zealand is holding up internationally, with an unemployment rate well under the OECD average of 8.3 percent.
The economy has been in recession since the start of 2008, but the single biggest quarterly increase in the unemployment rate since September 1988 is obviously of concern to this government, she added.
Against the European currency, the NZ dollar declined to a 2-day low of 2.1518 during Thursday's early deals. The next downside target level for the kiwi is seen around 2.171. The euro-kiwi pair closed Wednesday's deals at 2.1409.
Yesterday, the New Zealand currency advanced to a 9-month high of 2.1334 against the euro and a 5-day high of 1.2453 versus the aussie.
The interest rate decision in the euro zone is scheduled to be announced today alongside a statement from ECB President Jean Claude Trichet.
The European Central Bank is due to announce its monetary policy decision at 7.45 am ET. Most economists do not expect the ECB to make any change in its key interest rate from its current level of 1%.
In July, the ECB kept its key interest rate at 1%, where it has been since May. The bank also held its interest rate on marginal lending facility unchanged at 1.75% and the rate on deposit facility at 0.25%.
Before the ECB meeting, the Italian industrial production and the German factory orders-both for the month of June are expected in the upcoming European session.
From the U.S., the Labor Department is due to release its customary weekly jobless claims report for the week ended August 1st at 8:30 am ET.
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