NZD/JPY falls over 1% as NZ jobless data ease RBNZ pressure

Key points

The New Zealand Dollar retreated over 1% against the Japanese Yen on Wednesday, after data showed New Zealand’s unemployment rate had risen to a two-year high in the latest quarter, which reduced pressure on the Reserve Bank of New Zealand to continue policy tightening.

The country’s jobless rate rose to 3.6% in the second quarter, which has been the highest level since Q2 of 2021. Analysts on average had expected a lesser increase – to 3.5%.

The underutilization rate, a broader measure of spare labor capacity, went up to 9.3% in Q2 from 9% in Q1.

And, employment in New Zealand rose 1% quarter-on-quarter in the three months to March, the data showed, or at the sharpest rate since Q2 of 2022.

Kelly Eckhold, chief economist at Westpac, now expects the RBNZ to raise its benchmark interest rate in November instead of August, as the latest data print has “likely not been strong enough to overcome the RBNZ’s strong bias” to keep borrowing costs on hold.

Meanwhile, the Yen strengthened against peers, as market players were still assessing the implications of the Bank of Japan’s decision last week to make its yield curve control policy more flexible.

The central bank said it would offer to buy 10-year Japanese government bonds at 1% in fixed-rate operations, instead of 0.5% previously.

BoJ deputy governor Shinichi Uchida said earlier today that the decision was meant to make BoJ’s massive stimulus more sustainable and it was not a prelude to an exit from ultra-easy monetary policy.

As of 7:19 GMT on Wednesday NZD/JPY was retreating 1.18% to trade at 87.083.