Bloomberg News

New Zealand Dollar Surges on Rate-Boost Outlook; Aussie Gains

July 19, 2011

July 19 (Bloomberg) -- New Zealand’s dollar rose against all of its most-traded peers as investors bet the nation’s central bank may raise interest rates as early as next week.

The currency, nicknamed the kiwi, reached a record high against the dollar as Toronto Dominion Bank’s TD Securities unit said the Reserve Bank of New Zealand may raise its key rate a half-percentage point. Australia’s dollar gained against most major counterparts as stocks and commodities rose.

“We are warming to the theme” that there may be a 50 basis-point, or 0.50 percentage-point, increase in rates as soon as next week, Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore, wrote in a research note today. “At the very least, the bank may prepare the market for such a move at the 15 September Monetary Policy Statement.”

New Zealand’s dollar climbed as much as 1.5 percent to touch a record 85.73 U.S. cents before trading at 85.53 cents at 2:32 p.m. in New York, from 84.50 cents yesterday. The kiwi strengthened 1.4 percent versus the yen to 67.73, from 66.79.

Australia’s currency appreciated 1 percent to at $1.0714, from $1.0607. The Aussie advanced 1.2 percent to 84.83 yen, from 83.84 yen yesterday.

New Zealand’s central bank lowered the official cash rate to 2.5 percent in March to revive confidence after an earthquake devastated the southern city of Christchurch. Policy makers meet next week.

Investors expect the RBNZ to increase the key rate by 81 basis points in the next 12 months, according to a Credit Suisse Group AG index based on swaps. That compares with an outlook on July 11 for a 66 basis-point increase.

The MSCI World Index rose 1.2 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials gained 0.8 percent.

--With assistance from Chris Fournier in Halifax. Editors: Greg Storey, Paul Cox

To contact the reporters on this story: Allison Bennett in New York at abennett23@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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