Economy at risk of overheating

The official unemployment rate fell to 4.9 percent in the December quarter, significantly lower than the 5.9 percent economists had expected.

Stephen Toplis, head of research at BNZ, said market participants responded to the data release by buying the kiwi dollar and bidding long-dated bond yields higher.

The kiwi dollar was trading at 72.13 US cents at 5pm in Wellington, up from 71.71 cents yesterday.

The yield on a 10-year government bond also rose to 1.36 percent, having started the year below 1 percent, as investors began to price in the possibility the Reserve Bank of NZ will increase the official cash rate.