The New Zealand dollar <NZD=> held steady above 10-month lows on Wednesday ahead of key jobs data which could bolster the case for more domestic interest rate cuts.

The kiwi was trapped in a tight range around $0.7250, capped by a firmer U.S. dollar on the back of a fall in oil prices.

“Against a global backdrop of a firmer U.S. dollar, ongoing concern about a sharp slowdown in NZ growth and expectations of further RBNZ rate cuts should encourage New Zealand dollar selling on bounces,” said Bank of New Zealand currency strategist Danica Hampton.

The kiwi traded at $0.7253/56 by 0500 GMT compared with $0.7256/61 in local trade on Tuesday. It traded another narrow range during the day of $0.7246-0.7269.

The U.S. dollar touched a seven-week high against the yen <JPY=> as the fall in oil prices offset any disappointment about the tone of the Federal Reserve’s statement following its latest rate decision [nN05304800].

The Fed kept interest rates unchanged, while its statement suggested it was in no rush to raise them.

The New Zealand currency was buoyed on its cross rate against the Aussie dollar <NZDAUD=R> as investors factored in Australian rate cuts after the Reserve Bank of Australia said the previous day there was scope for a “less restrictive” policy.

Ratings agency Standard & Poor’s affirmed New Zealand’s sovereign ratings, saying the economy’s strong fiscal position was offsetting the risks from the slowing economy, a high current account deficit and large external debt [nWEL30682].

The report had little impact on the currency, with the market more squarely focused on the rate outlook.

New Zealand second-quarter jobs data is due Thursday at 10.45 a.m. (2245 GMT) and is expected to show the unemployment rate rose to an 18-month high of 3.8 percent, from 3.6 percent in the first quarter, according to a Reuters poll.

“Any sign of easing labour market pressure will add downside risks to the New Zealand dollar,” Hampton said.

In the near term, the kiwi is seen supported at $0.7225, which it tested and stalled at overnight, with $0.7300 the first line of resistance.

NZ government bonds were weaker along the curve. The yield on the benchmark 10-year government bond <NZ10YT=RR> was two basis points higher at 6.17 percent. Yields move inversely to prices.

Source: http://www.afxnews.com

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