May 9, 2013 / 5:56 AM / in 4 years

FOREX- Antipodean currencies steal limelight after strong jobs data

5 Min Read

* Aussie and Kiwi lifted by surprisingly strong jobs numbers

* Euro buoyed by German data

* Dollar shy of 100 yen, Japanese investors slow to buy foreign debt -trader

By Sophie Knight

TOKYO, May 9 (Reuters) - The Australian and New Zealand currencies bounced on Thursday after both countries posted stellar jobs data, while the euro held near a one-week high against the dollar after upbeat German factory activity continued to bolster sentiment.

Investors drove the Aussie up 0.6 percent to $1.0232 after data showed jobs surged by 50,100 jobs in April, well above a median estimate of 12,000 in a Reuters poll.

The move helped the Australian dollar recover from a two-month low of $1.0155 struck on Tuesday, after the central bank cut interest rates to a record low.

The Kiwi also rose over half a U.S. cent to $0.8451 , jumping as high as $0.8470, after data showed unemployment falling to a three-year low in the March quarter and a hefty increase in full-time jobs.

That helped it pulled away from a trough of $0.8360 plumbed on Wednesday after the Reserve Bank of New Zealand confirmed it had intervened to cap what it saw as an overvalued currency.

"The employment data was a catch-up with the rest of the data. The rest of the economy was doing well and the employment data was the outlier. It's now more consistent with other data we've had from New Zealand," said Bill Diviney, currency strategist at Barclays.

Diviney added that the Reserve Bank of New Zealand would have to meet strict criteria to intervene on a larger scale, such as the exchange rate being unjustified by fundamentals.

"If you look at the yield differential between New Zealand and the U.S., the Kiwi is trading in line with that. I think it would be difficult for them to make a case."

Against the euro, the Aussie jumped 0.7 percent to 1.2836 , pulling further away from a two-month low hit against the common currency on April 23.

The euro inched up 0.1 percent to $1.3155, failing to build on the one-week high of $1.322 hit on Wednesday. Initial resistance is seen around the May 1 peak of $1.3243, with a break there taking it back to levels not seen since February.

"The impact of the ECB rate cut was limited. In the short-term the euro might attempt a move lower but on the other hand there's fewer people betting on a long-term downwards move," said Jun Kitazawa, senior vice president of FX at Brown Brothers Harriman.

Investors warmed to the common currency after German industrial output unexpectedly jumped in March, fanning hopes that Europe's top economy is gaining traction.

The move also came after a European Central Bank Executive Board member said the bank was not a "toothless tiger" and still had tools to deploy should the euro zone continue to worsen after last week's cut in interest rates to a record low.

Against the yen, the common currency dipped 0.2 percent to 129.91, but was not far off a three-week high of 130.43 hit on Wednesday.

The dollar also pulled back against the Japanese currency, dropping 0.3 percent to 98.72 yen.

Some analysts say the greenback's inability to pierce the 100 yen level over the past few weeks is a result of Japanese investors purchasing yen to buy domestic stocks as the Nikkei index shoots to five-year highs.

The dollar has trodden water against the yen for the past month, after surging against the Japanese currency on April 4, when the Bank of Japan launched an audacious monetary easing programme to purchase 7.5 trillion yen worth of government bonds every month. The Nikkei has shot up 13.8 percent since then, and is up 66 percent since mid-November.

"Whereas for much of this rally it was exporters doing well on expectations of a weaker yen, the market is now starting to price in domestic growth prospects, not just the outward-oriented parts of the Nikkei," Barclays' Diviney said.

However, market participants say yen selling may increase if the domestic investors finally begin to shift into foreign debt, a move speculated upon since the April 4 BOJ easing was announced.

"It's taken time because Japanese investors move very slowly and have been concerned about the currency risk with foreign bonds. But now there's no yield on Japanese bonds they have two choices: go after domestic stocks or buy debt overseas," said a trader at a domestic bank.

"We're starting to hear that more retail investors and investment trusts are making that shift, which should increase yen selling, but it's going to be slow and gradual," he said.

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