NZ dollar slips after jobs data, RBNZ warning

* Kiwi around $0.72, dragged lower by fall vs Aussie

* NZ jobless jump sparks kiwi fall, debt rally

* RBNZ governor underscores NZ's vulnerable recovery

WELLINGTON, Nov 5 - The New Zealand dollar slipped on Thursday as weak jobs data and central bank comments on the fragility of the economy's recovery pointed to continued low interest rates that would dent the yield appeal of the kiwi.

The kiwi's retreat started after data showed New Zealand's jobless rate hit a nine-year high, backing the case for rates to be held low well into next year.

The decline gathered pace when Reserve Bank of New Zealand Governor Alan Bollard said financial markets were mistakenly treating the Australian and New Zealand economies as similar, when the reality was that New Zealand's recovery was slow and vulnerable. See [ID:nWEL164600].

"The market is taking that as a green light to buy Aussie against the kiwi, given Bollard's highlighting of the clear differences economically between the two economies," said RBC Capital Markets senior currency strategist Sue Trinh.

The NZ dollar slipped to a three month low against the Aussie <NZDAUD=R>. It was at $0.7187/92 against the U.S. dollar <NZD=D4> at 0400 GMT compared with $0.7191/97 in Wednesday's late local trading. It ranged between $0.7177 and $0.7290 during the day.

New Zealand's jobless rate hit 6.5 percent in the third quarter against expectations of 6.4 percent.

"This will give the RBNZ confidence that inflation will remain well contained within their target band, and reinforces their stance that rates are on hold until the second half of next year," said ANZ-National Bank senior economist Khoon Goh.

Nevertheless, financial markets are pricing in up to 50 basis points of tightening <NZDOIS> <CSNZD02> by the end of April next year, as the emergence from recession gathers pace.

"The more timely indicators -- confidence, housing, expenditure -- all continue to rise and suggest that a 2.50 percent cash rate will become harder to justify in the coming months," said RBC Capital Markets senior strategist Su-Lin Ong.

The weak jobs data and Bollard comments saw swap rates rally, with yields on 90 day bank bill futures <0#NBB:>, which move inversely to prices, up to 4 basis points lower.

However, longer dated government debt was weaker, with the benchmark 10-year bond <NZ10YT=RR> 4 basis points higher at 5.73 percent.