Bloomberg News

Kiwi Rises to Record on Confidence Data; Aussie Gains on Greece

June 30, 2011

June 30 (Bloomberg) -- New Zealand’s dollar rose to a record as reports showed business confidence and home-building approvals increased. Australia’s currency gained as optimism Greece will avoid a default boosted higher-yielding assets.

The so-called Aussie strengthened to a three-week high versus the greenback after a central bank report showed lending expanded last month and as traders trimmed bets on an interest- rate cut. Both South Pacific nations’ currencies were bolstered before the Greek parliament votes on plans to execute austerity measures. Goldman Sachs Group Inc. recommended investors buy Australia’s dollar against the yen.

“The business confidence numbers were quite constructive for the kiwi,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “It’s likely the second Greece vote on the implementation law will pass and that should see a stabilization in risk appetite. The Aussie, kiwi and commodity currencies in general should outperform.”

New Zealand’s dollar rose to 82.84 U.S. cents as of 4:21 p.m. in Sydney from 82.53 cents yesterday in New York, after reaching 83.19 cents, the highest level since it was freely floated in 1985. The kiwi traded at 66.63 yen from 66.67 yen. Australia’s dollar gained 0.4 percent to $1.0729 after climbing to $1.0751, the strongest since June 7. The currency was at 86.28 yen from 86.29 yen.

Greece Progress

The Australian and New Zealand dollars strengthened after Greek Prime Minister George Papandreou won support yesterday for a bill laying out his strategy for budget cuts. Luxembourg’s Jean-Claude Juncker, who leads a group of euro-area finance ministers, said the vote paved the way for payment of the next aid installment from euro-area governments and the International Monetary Fund.

A net 46.5 percent of companies in New Zealand expect the economy to improve over the next year, up from 38.3 percent in May, according to a survey by ANZ National Bank Ltd. The net figure subtracts the number of pessimists from the number of optimists. Home-building approvals increased 2.2 percent in May, after dropping 1.2 percent in April, Statistics New Zealand said.

The Australian dollar gained versus 12 of its 16 major counterparts after the Reserve Bank said loans provided by banks and finance companies increased 0.3 percent in May from the previous month.

Goldman Recommendation

Goldman Sachs recommended investors buy the Australian dollar versus the yen, targeting an advance to 90 yen amid prospects for “positive surprises” in global economic data. The bank recommended exiting the position should the currency weaken to 84 yen.

“The Australian dollar is uniquely positioned to benefit from this, especially given that the Australian rates market is still pricing 11 basis points in cuts by year-end,” wrote strategists led by London-based Thomas Stolper, chief currency strategist, in a note to clients. Aussie-yen is “a compelling cross as risk appetite continues to normalize.”

Cash-rate future contracts predict the RBA’s benchmark rate will be 4.65 percent at year-end, compared with a forecast for 4.50 percent on June 27.

Benchmark interest rates are 2.5 percent in New Zealand and 4.75 percent in Australia, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Australia’s 10-year bonds fell for a third day, with the yield climbing three basis points to 5.21 percent, according to data compiled by Bloomberg.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped two basis points to 3.36 percent.

--Editors: Nicholas Reynolds

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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