(Bloomberg) -- The double whammy of a stronger dollar and weak Chinese trade data kept a lid on the Australian and New Zealand currencies, with most Asian index futures foreshadowing declines after U.S. payrolls data bolstered prospects of an interest-rate increase this year.
Both the Aussie and the Kiwi were near their lowest levels in a month as the biggest increase in U.S. employment this year underpinned the dollar and after Chinese exports and imports slumped more than analysts anticipated, stoking bets that regulators there will have to expand economic stimulus. While futures signaled losses for indexes from Australia to Hong Kong, contracts on Japanese shares were up in most recent trading with the yen at its weakest level in 11 weeks. Oil and gold tumbled on Friday.
“The U.S. labor market report was a doozy,” Philip Borkin, senior economist in Auckland at ANZ
Bank New Zealand Ltd., said in a client note. “The figures gave an unequivocally positive signal on the state of the U.S. economy. Moreover, with financial markets generally taking the prospects of higher rates pretty well, then this will give Fed officials further comfort that the time to begin ending emergency monetary policy settings is fast approaching.”
Odds on the Federal Reserve hiking benchmark rates at its next meeting in December jumped to 68 percent after the payrolls data signaled the U.S. labor market is on a solid footing. The report vindicated rhetoric from Fed officials, who had been working to reintroduce the prospect of a 2015 rate increase into the market discourse. Lackluster inflation and concern over the slowdown in China stayed the Fed’s hand in September and October. Data on Chinese consumer prices to retail sales this week set will help investors round out the picture as to the state of the the world’s second-largest economy.
The Aussie dropped 0.1 percent to 70.36 U.S. cents as of 7:39 a.m. Tokyo time, after touching its weakest level since Oct. 2 and slumping 1.4 percent on Friday. The Kiwi was little changed at 65.34 U.S. cents following a retreat of as much as 1.7 percent last session to its lowest price since Oct. 6. Both Australia and New Zealand count China among their biggest trading partners.
Data released at the weekend showed Chinese exports fell 6.9 percent in October, exceeding all 31 estimates from economists surveyed by Bloomberg. Imports were also weaker than expected, sinking 18.8 percent after analysts tipped a drop of 15.2 percent. The trade surplus swelled to a record $61.6 billion. Other data this week is projected to show continued deflation in the industrial sector and a softening in consumer- price inflation, weakness that could spur an uptick in stimulus from the central bank.
“The October trade data keep pressure on for more domestic easing,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong.
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, jumped 1.1 percent on Friday to close at its highest level since at least 2005 after the employment data.
U.S. employers added 271,000 workers to nonfarm payrolls last month, up from an increase of 137,000 in September and blowing past the 185,000 advance projected by economists. The jobless rate dropped to 5 percent.
The euro was little changed at $1.0736 Monday after sinking 1.3 percent last session, while the yen traded at 123.28 per dollar, extending losses at its weakest level since Aug. 21. Japan’s currency typically moves at odds with the nation’s exporter-heavy stock indexes.
Bets on a December hike have increased from 50 percent last week and 37 percent a month ago, according to futures trading tracked by Bloomberg.