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AUD Edges Up after Strong Jobs Data; Kiwi Shrugs off GDP

Dec 16 (Reuters) - The Australian dollar edged higher on Thursday after strong jobs data raised the likelihood that the central bank will wind down its pandemic-era bond buying early next year, following in the foot steps of the U.S. Federal Reserve.

The Aussie rose slightly to $0.7180 before steading by midday, with the employment data and a speech by Reserve Bank of Australia (RBA) Governor Philip Lowe coming hours after the Fed said its bond buying program may end by March, followed by three possible rate hikes in 2022.

The New Zealand dollar dipped 0.3% to $0.67735. The New Zealand economy shrank 3.7% in the third quarter, the second-largest decline on record though not as bad as economists had expected in a Reuters poll. 

Australian employment blew past forecasts, adding 366,100 jobs in November, helping to push down the jobless rate to 4.6% from 5.2%. The RBA had forecast unemployment would not reach 4.5% until the middle of next year.

The yield on the Australian 3-year bond climbed to its highest in around a week, with market bets increasing that the RBA will begin to wind-down or completely end its A$4 billion ($2.87 billion) a week bond-buying program as early as February.

"The remarkable recovery in Australia's labour market following the recent lockdowns suggests that the Reserve Bank of Australia will end its asset purchases altogether in February," Marcel Thieliant, a senior Australia and New Zealand Economist for Capital Economics, said in a note.

Earlier, Lowe said the RBA was open to tapering its quantitative easing starting in February. He cautioned, however, that this would be dependent on data, and said rate hikes are unlikely in 2022. 

The New Zealand economy is expected to bounce back in the fourth quarter after the third was largely dominated by lockdowns in the country's largest city. The kiwi was largely unmoved by the GDP figure.

The Reserve Bank of New Zealand has already hiked interest rates twice in recent months over concerns of an overheated economy.

The Bank of England and European Central Bank also meet this week.

($1 = 1.3931 Australian dollars)

Reporting by Nikhil Kurian Nainan in Bengaluru Editing by Shri Navaratnam

Source: Reuters

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