The New Zealand dollar dropped to a month low against its trans-Tasman counterpart after a better than expected jobs report eased fears about Australia's economy.

The kiwi fell as low as 94.01 Australian cents, the lowest since Dec. 16, and traded at 94.27 at 5pm in Wellington from 95.19 cents yesterday. It was little changed at 77.22 cents from 77.20 cents at 8am, up from 77.03 cents yesterday.

Australia added 37,400 jobs last month, beating the 5,000 expected, with the bulk being full-time positions. The unemployment rate fell to 6.1 percent and the participation rate beat forecasts at 64.8 percent, according to Bureau of Statistics data. That lifted demand for the Australian dollar, which has been under pressure from falling commodity prices, which erode the outlook for the nation's resources-based exports.

"The employment report was quite a surprise - it was good on all angles," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "We're happy enough to buy the Aussie, selling the kiwi as we look for it to rise," he said, referring to the cross-rate in Australian dollar terms.

New Zealand government figures showed food prices rose 0.3 percent in December, and were up an annual 1 percent in what's seen as a low-inflation environment. The 2014 fourth-quarter consumers price index is scheduled for release next week, and economists are anticipating the data to show inflation at the bottom end of or below the Reserve Bank's 1 percent to 3 percent target band.

Real Estate Institute figures showed the pace of New Zealand's house price inflation was 6 percent in 2014, led by 13.5 percent increase in the country's biggest city, Auckland, where a lack of supply has created excess demand as inbound migration increases the number of buyers.

Westpac's Speizer said the next major local event will be the Reserve Bank's policy review on Jan. 29 to see how the bank plans to respond to low inflation.

The prospect of low inflation has seen longer dated interest rates come down as investors are more prepared to accept reduced nominal returns if their real return remains the same. At the same time, shorter-dated rates have been declining at a slower pace, with the central bank's benchmark official cash rate at 3.5 percent. That's led to what's known as a flattening of the interest rate curve.

The two-year swap rate increased to 3.735 at 5pm from 3.725 yesterday, while the 10-year swap rate was unchanged at 3.835.

Westpac's Speizer said the last time there was an inversion of the curve - where longer-dated interest rates were higher than short-term rates - was between 2005 and 2008, when New Zealand's central bank aggressively lifted the OCR to try and cool a buoyant property market.

The kiwi dollar rose to 90.88 yen at 5pm in Wellington from 90.51 yen yesterday, and gained to 4.7821 Chinese yuan from 4.7732 yuan. It increased to 65.53 euro cents from 65.41 cents, and declined to 50.67 British pence from 50.83 pence. The trade-weighted index was little changed at 78.56 from 78.63 yesterday.