New Zealand’s Kiwi jumps most in 10 months as jobless rate falls

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New Zealand’s dollar advanced the most in more than 10 months as a report showed the nation’s jobless rate fell to its lowest since 2009 and the central bank downplayed plans for further stimulus.

The kiwi, nicknamed for the flightless bird depicted on its NZ$1 coin, rose versus all 16 of its major peers and touched its highest in almost a month versus the U.S. dollar. New Zealand’s unemployment rate slumped to 5.3 percent in the three months through December, the lowest since the period ending March 2009, Statistics New Zealand said Wednesday in Wellington. Reserve Bank Governor Graeme Wheeler signaled he won’t rush to cut interest rates further.

Concern that a slowdown in China will erode demand for milk, one of New Zealand’s core exports, and mute inflation, has weakened the kiwi 9 percent against the dollar during the past 12 months. Wheeler warned last week that further easing may be needed to spur the economy, even as he held interest rates unchanged. Wheeler seemed to dial back the likelihood of a rate cut at its next meeting, saying only that “some further policy easing may be needed over the coming year.”

“Everyone’s had to scramble and rethink their thought process on the kiwi,” said Richard Franulovich, chief currency strategist for the northern hemisphere at Westpac Banking Corp. in New York. “Whereas the RBNZ issued a statement last week and seemed to get people warming to the possibility of a March ease, Wheeler’s comments last night have dashed those hopes,” he said, adding that “the economy is not in terrible shape.”

The kiwi gained as much as 2.8 percent, the most since March, before trading up 2.3 percent at 66.64 U.S. cents as of 3:43 p.m. in New York. The currency has slumped 2.6 percent in the past 30 days, the fourth biggest loser of the greenback’s 16 major peers even after Wednesday’s gains.

Painful Exit

The gains came even as hedge funds and other large speculators boosted bets against the kiwi to the most since September last week. Net contracts on losses totaled 5,400 in the week through Jan. 26, almost double the previous week’s tally.

Investors reduced the premium paid for contracts protecting against a kiwi slump versus a kiwi rise on Wednesday, options data show. The premium for contracts insuring against a loss versus those mitigating against gains shrank to 1.18 percentage point, the least since Jan. 6 on a closing basis.