The New Zealand dollar gained after government figures showed a strengthening labour market is soaking up an increased supply of new migrants and returning kiwis, though as yet not feeding through into wage inflation.
The kiwi rose to 78.30 US cents at 5pm in Wellington from 77.75 cents at 8am and 77.44 cents yesterday. The trade-weighted index advanced to 77.05 from 76.29 yesterday.
The unemployment rate fell to 5.4 percent in the three months ended Sept. 30, from 5.6 percent in the June quarter, according to Statistics New Zealand. Employment growth of 0.8 percent was twice the pace of population gains, with higher migration holding back wage increases. The labour cost index, a measure of wage inflation, rose at a 1.9 percent annual pace in September.
"We had quite a decent employment number today and that pushed the kiwi up when it was all said and done by 80 pips - quite a big response" said Imre Speizer, senior market strategist at Westpac Banking Corp in Auckland. "It's possibly overdone when you consider if employment improves why should the exchange rate improve in a direct sense - if interest rates don't move, this has no impact on monetary policy."
Westpac's Speizer said an 80 basis point increase in the currency would typically see a 5 basis point rise in the two-year swap rate, which only increased 1 basis point on the employment data due to the soft wage inflation.
US employment figures this week will continue to dominate the broader direction of the currency, with signs of strength in the US labour market likely to fuel optimism the Federal Reserve is on track to start raising interest rates next year.
Traders are also watching for on a speech by Bank of Japan governor Haruhiko Kuroda at the Kisaragi-kai meeting in Tokyo, after he unexpectedly announced further monetary stimulus measures on Friday. The kiwi climbed to 89.01 yen at 5pm in Wellington from 88.26 yen yesterday.
The local currency rose to 89.43 Australian cents from 88.71 cents yesterday, and gained to 62.33 euro cents from 61.81 cents. It advanced to 48.89 British pence from 48.40 pence yesterday.