New Zealand dollar hits seven-month low as weak jobs seals case for November cut

By Stella Qiu

SYDNEY, Nov 5 (Reuters) - The New Zealand dollar hit a seven-month low on Wednesday after a weak jobs report sealed the case for a rate cut this month, while the diverging rate outlook with Australia also saw the kiwi dive to a 12-year trough against the Aussie dollar.

The kiwi NZD=D3 slipped 0.1% to $0.56438, having slid 1.2% overnight to $0.5635, the lowest since April 10. That was largely thanks to a resurgent U.S. dollar and local data showing that the unemployment rate climbed its highest since 2016 at 5.3%, though the rate came in as expected.

Two-year swap rates NZDSM3NB2Y= eased 4 basis points to 2.5026% as markets moved to fully price in a quarter-point rate cut from the Reserve Bank of New Zealand at their policy meeting on November 26, with a split chance for another move next year.

"Today's data suggests the labour market is unlikely to become a source of CPI inflation pressures any time soon," said Miles Workman, a senior economist at ANZ.

"At this early stage of recovery the RBNZ will be keen that monetary conditions do not tighten over the summer. In our view, that speaks to a 25 (basis point) cut in November and a signal from the committee that it stands ready to cut further should the data warrant."

That left the kiwi struggling near a 12-year low against the Aussie, which has been getting some lift from the possibility that the Reserve Bank of Australia might be done tightening after it held rates steady on Tuesday.

The Aussie hit NZ$1.1503 on Wednesday AUDNZD=, after 10 sessions of consecutive gains.

Against the U.S. dollar, the Aussie AUD=D3 eased 0.2% to $0.6483, marking the sixth day of declines. It fell 0.8% overnight as global stocks tumbled on concerns of a market correction and as the greenback found strength from differing views among policymakers about a rate move by the U.S. Federal Reserve in December.

It faces resistance at $0.65, while enjoying support around $0.6440.

"The (RBA) Board is incredibly focussed on the data flow from here to resolve the recent tension in the data," said Belinda Allen, head of Australian economics at the Commonwealth Bank of Australia.

"We expect the cash rate to remain on hold in the foreseeable future... If inflation remains elevated in 2026 and does not come down on a quarterly basis, the RBA may need to act."

Swaps imply just a 12% chance that the RBA will cut rates in December, with a potential final cut in the cycle most likely in May after two quarterly inflation reports. There is a small risk that the entire easing cycle is already over.