The New Zealand dollar is sharply higher this morning.
The Kiwi was trading at 66.7 US cents by 7am, a rise of 2.4 percent from yesterday. It rose 0.6 percent to 93.15 Australian cents.
The US dollar has weaked against most major currencies. But the rise in the Kiwi also follows the release of better- than-expected employment numbers and a warning from Reserve Bank Governor Graeme Wheeler that he is in no hurry to cut interest rates again.
Many people have been expecting another cut to the official cash rate (OCR) because inflation is so weak. The Reserve Bank’s inflation target is between 1 – 3 percent. But inflation is just 0.1 percent right now.
Mr Wheeler told the Canterbury Employers’ Chamber of Commerce a major reason for the low inflation rate is that global oil prices have plunged. If you strip out the effect of the oil prices then core inflation is running at 1.6 percent.
The Reserve Bank is also well aware that another cut to the OCR could fuel Auckland house prices.
That does not mean a rate cut is completely off the table. Rates would certainly be cut if there was a global economic downturn.
Mr Wheeler’s speech was delivered on the same day the latest employment numbers were released.
Unemployment fell 0.7 percent to 5.3 percent. That was a surprise. Economists had been expecting unemployment to rise to 6.1 percent.
The participation rate fell by 0.4 percent to 68.4 percent. Unions and Labour are concerned this means more people are opting to give up looking for a job.
Europe closed 1.5 percent lower, while the US market got off to a weak start.
The Dow Jones industrial average opened 100 points higher and then fell more than 150 points.
A rally in the oil price helped stocks stage a turnaround late in the trading session. The Dow closed up 1.3 percent while the S&P500 gained 0.5 percent. The Nasdaq finished 0.28 percent lower.
West Texas crude oil finished 8.8 percent higher at US$32.50.
European Brent oil gained 7.7 percent, trading at US$35.25.
Gold closed near a three month high, finishing up 1.24 percent at US$1141 an ounce.
Newshub.
