By Ron Harui
Jan. 7 (Bloomberg) -- Australia’s dollar rose to a three- month high and New Zealand’s dollar climbed to its strongest in almost three weeks versus the greenback as gains in equities and commodities revived appetite for higher-yielding assets.
The currencies also advanced to the highest since November against the yen on optimism U.S. President-elect Barack Obama’s $775 billion fiscal stimulus will help the world’s largest economy recover from recession. The Australian and New Zealand dollars gained for a third day versus the U.S. currency as the Bloomberg UBS Constant Maturity Commodity Index of 26 raw materials climbed to its highest in almost two months.
“People who pulled money out from abroad last year are now re-investing their funds, as risk-taking sentiment seems to be improving,” said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo. “Higher-yielding assets in Australia and New Zealand are attractive for U.S. and Japanese investors.”
Australia’s dollar rose to 72.18 U.S. cents at 2:20 p.m. in Sydney, from 71.22 cents in late Asian trading yesterday. It touched 72.67 cents, the strongest since Oct. 8, and has rebounded 20 percent from the five-year low of 60.10 cents reached on Oct. 28. The currency rose to 67.72 yen from 66.92 and earlier touched an eight-week high of 68.26 yen.
New Zealand’s dollar gained to 59.74 U.S. cents from 58.72 cents in Asia yesterday. It reached 59.93 cents, the strongest since Dec. 19, after the country’s annual trade deficit unexpectedly narrowed in November. The currency touched a seven- week high of 56.33 yen, before trading at 56.03 yen from 55.17 yen yesterday.
Commodities
The Bloomberg UBS Constant Maturity Commodity Index yesterday reached 952.42, the highest since Nov. 10. Crude oil touched a five-week high of $50.47 a barrel on speculation fighting in the Gaza Strip will disrupt Middle East oil supplies.
The MSCI Asia-Pacific Index of regional shares rose 2.1 percent today, following a 0.8 percent advance in the Standard & Poor’s 500 Index of U.S. equities.
New Zealand’s trade deficit narrowed to NZ$5.16 billion ($3.1 billion) in the 12 months ended Nov. 30 from NZ$5.27 billion in the year through October, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of five analysts was for a NZ$5.49 billion shortfall.
The Australian and New Zealand dollars gained for a fifth day versus the yen after General Motors Corp. said rescue loans already pledged by the U.S. government should ensure the automaker’s survival.
The U.S. Treasury has pledged as much as $13.4 billion in aid to help GM pay its bills and $6 billion to prop up lender GMAC LLC, which GM relies on for auto loans and dealer support.
Potential Upside
Japan’s yen has weakened against 14 of the 16 most-active currencies in 2009, after climbing last year by at least 10 percent against each of the more than 170 global currencies tracked by Bloomberg. Bank of Japan Governor Masaaki Shirakawa said Jan. 4 the central bank may use measures including monetary policy to counter the strengthening yen as the economy faces severe conditions this year.
“Near 20 percent overvaluation in the yen and rising currency rhetoric from Japanese officials and signals of a return toward foreign-exchange risk-taking implies further upside potential for a long Aussie-yen position,” wrote Dwyfor Evans, a strategist in Hong Kong at State Street Global Markets, in a research note yesterday.
Benchmark interest rates are 5 percent in New Zealand and 4.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors through so- called carry trades.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.
‘Positive Development’
Australia’s dollar held gains after the Bureau of Statistics said today that the nation’s retail sales rose 0.1 percent in November, matching economists’ expectations. Retail sales gained 0.2 percent in October.
“Today’s retail sales report is a positive development,” Ashley Davies, a currency strategist at UBS AG in Singapore, wrote in a research note today. “On balance, we remain of the view that the Australian dollar should have another period of weakness as risk aversion deteriorates once more.”
Australian government debt advanced. The yield on the 10- year bond fell four basis points, or 0.04 percentage point, to 4.25 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.337, or A$3.37 per A$1,000 face amount, to 108.182.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was at 4.43 percent from 4.37 percent yesterday.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net
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