By Candice Zachariahs
March 27 (Bloomberg) -- The Australian and New Zealand dollars headed for their biggest monthly advances against the greenback in more than 20 years, as commodities prices and global equities rallied, boosting demand for the nations’ assets.
The currencies may advance for a fourth week as investors pare expectations of further Australian and New Zealand interest-rate cuts and policy makers in the U.S., U.K. and Japan flood their economies with cash to hold down borrowing costs. New Zealand’s dollar climbed as a report showed the economy shrank less than some economists forecast.
“There has been a clear strengthening trend in commodity prices and that’s helping boost commodity currencies, particularly those like Australia and New Zealand where the central banks are a long way away from entering quantitative easing,” said John Horner, a currency strategist at Deutsche Bank AG in Sydney.
Australia’s currency was little changed at 70.17 U.S. cents as of 11:26 a.m. in Sydney, from 70.16 cents late in New York yesterday. The currency slipped 0.3 percent to 69.06 yen.
New Zealand’s dollar advanced to 57.77 U.S. cents from 57.46 cents before the gross domestic product report and 57.55 cents yesterday. It bought 56.87 yen from 56.79 yen.
The currencies will find buyers toward 72.50 U.S. cents for the Australian dollar and 60 U.S. cents for New Zealand’s, near their highs for this year, said Horner.
Australia’s dollar advanced 9.8 percent this month, the most since 1973, paring its decline this year to 0.1 percent. The so-called kiwi has gained 15 percent against the greenback, its largest advance since 1985, and helping it pare this year’s loss to 0.2 percent.
The so-called Aussie rose 11 percent this month against the yen, the most since 1995. The New Zealand dollar gained 16.6 percent versus Japan’s currency, the most since 1985.
New Zealand Recession
New Zealand’s dollar rose as GDP declined 0.9 percent from the third quarter, the most in 16 years, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of nine economists was for a 1.1 percent drop.
The data “wasn’t as bad as people had feared,” said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. Still, “the currency at current levels could extinguish the recovery the Reserve Bank forecast for the second half of this year.”
A strong currency reduces the local value of overseas sales of the nation’s companies. The currency’s gains may add pressure on central bank Governor Alan Bollard to trim interest rates from a record-low 3 percent.
Traders are betting on a 72 percent chance of a 25 basis point cut from the Reserve Bank of New Zealand when it meets April 30, according to a Credit Suisse Group AG index based on swaps trading. Australia’s central bank will probably cut by 25 basis points to 3 percent, a separate credit Credit Suisse index shows. A basis point is 0.01 percentage point.
Commodities, Equities, Rates
The premium on 10-year Australian debt climbed to 1.79 percentage points over U.S. Treasuries of the same maturity, while the gap for New Zealand gained to 2.41 percentage points.
The South Pacific countries’ currencies also gained as the UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials rose 1 percent yesterday. Crude oil and gold, Australia’s third and fourth most-valuable commodity exports, advanced. The index has added 5 percent this year.
U.S. stocks climbed yesterday after Best Buy Co., the nation’s largest electronics chain, announced better-than- forecast earnings. That helped extend the MSCI World Index’s best month of gains since 1975.
Higher interest rates in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attract investors to the South Pacific nations’ higher- yielding assets. The risk in such trades is that currency market moves will erase profits.
Australian Bonds
Australia today sold A$600 million ($421 million) of securities maturing March 2019 at a weighted average yield of 4.55 percent. The so-called bid-to-cover ratio at the auction was 3.
Australian government bonds fell for a sixth day, the longest stretch of losses since February 2008. The yield on 10- year notes rose three basis points, or 0.03 percentage point, to 4.55 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.24, or A$2.40 per A$1,000 face amount, to 105.57.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.81 percent from 3.83 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Posts
No comments:
Post a Comment