Bloomberg News

Aussie, N.Z. Dollars Set for Second Weekly Gain on Stocks Rally

July 08, 2011

July 8 (Bloomberg) -- The Australian and New Zealand dollars headed for a second weekly advance against the yen as a global rally in stocks and commodities supported demand for higher-yielding assets.

Australia’s currency rose to its strongest level in two months against the yen after oil extended gains for a second day amid speculation U.S. employment gains will strengthen. New Zealand’s dollar climbed for a second week versus the greenback to trade 0.2 percent from its record high.

“There are signs that the so-called soft patch is fading,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “It will be a clear positive for higher-yielding currencies such as the Aussie and the kiwi.”

Australia’s dollar fetched 87.66 yen at 4:37 p.m. in Sydney, from 87.55 yen in New York yesterday. It earlier touched 87.69 yen, its highest level since May 11 and traded at $1.0780 from $1.0776, after it reached $1.0790 on July 1, the most since May 11. New Zealand’s dollar was at 83.33 U.S. cents from 83.34 cents yesterday, when it touched 83.44 cents, the highest since the currency was freely floated in 1985. It bought 67.75 yen from 67.72 yen.

The so-called Aussie advanced 0.7 percent against the yen this week, while the New Zealand dollar strengthened 1.3 percent versus Japan’s currency.

‘Unduly Influenced’

The MSCI Asia Pacific Index rose 0.6 percent and the Nikkei 225 Stock Average added 0.7 percent, following a 1.1 percent jump in the Standard & Poor’s 500 Index in New York. The Thomson Reuters/Jefferies CRB Index of raw materials climbed 1.8 percent yesterday, its biggest advance since May 18.

Figures from ADP Employer Services showed companies in the U.S. added 157,000 workers to their payrolls in June. The median estimate of economists surveyed by Bloomberg News called for an advance of 70,000. The government reports June payrolls data today.

The Aussie failed to extend gains as the swaps market signaled the Reserve Bank of Australia will refrain from raising interest rates in the next year.

The RBA is “being unduly influenced by the ebb and flow of sentiment,” Adam Carr, a Sydney-based senior economist at ICAP Australia Ltd., wrote in an e-mailed note to clients. They “are formulating their economic views by reading the newspapers, rather than by looking at hard data.”

RBA Rate Bets

Swaps traders are pricing in a 3-basis-points cut to the RBA’s key rate in the next 12 months, a Credit Suisse AG index showed today. As recently as June 15, the gauge signaled 14 basis points of tightening.

The RBA held borrowing costs at 4.75 percent on July 5, where the rate has been since November. The number of people employed in Australia rose by 23,400 in June, led by a jump in full-time jobs, the statistics bureau said yesterday.

Current-account deficits are acceptable so long as government policies aren’t distorting capital flows, Guy Debelle, the RBA’s assistant governor for financial markets, said today in Adelaide. He didn’t mention the current state of the Australian economy or monetary policy in the text of his prepared speech.

Australia’s current-account gap widened for a third straight quarter in the first three months of this year, reaching A$10.45 billion ($11 billion) after a A$8.09 billion shortfall in the fourth quarter of 2010, the Bureau of Statistics said May 31.

Ten-year Australian bond futures for June delivery were little changed today at 94.75 on the Sydney Futures Exchange. Australia’s benchmark 10-year bond yield climbed to 5.24 percent from 5.20 percent yesterday.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, gained 1 basis point to 3.4 percent today.

--With assistance from Brendan Murray in Sydney and Monami Yui in Tokyo. Editor: Jonathan Annells, Nate Hosoda

To contact the reporter on this story: Kristine Aquino in Singapore at Kaquino1@bloomberg.net;

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


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