Bloomberg News

Aussie Rises Versus Yen on Import Prices; Kiwi Gains on Stocks

July 22, 2011

July 22 (Bloomberg) -- Australia’s dollar climbed for a second day against the yen as signs of rising prices in the economy added to prospects that the Reserve Bank will raise interest rates rather than considering cuts this year.

The Aussie advanced this week versus the U.S. and Japanese currencies after data showed import prices increased by more than economists forecast, preceding a report next week that may show inflation accelerated to a more than two-year high. New Zealand’s dollar climbed for a second day against the yen as gains in stocks and optimism that European leaders will contain the region’s debt crisis boosted demand for higher-yielding assets.

“I’m very bullish on the Aussie,” said Richard Grace, chief currency strategist and head of international economics in Sydney at Commonwealth Bank of Australia. The inflation report is “going to remove some of these mispricings, in my view, on interest-rate cuts in Australia.”

Australia’s dollar rose 0.3 percent to 85.12 yen at 11:18 a.m. in New York from 84.89 yen yesterday in New York, extending gains this week to 1 percent. New Zealand’s currency climbed 0.2 percent to 67.74 yen and was up 1.2 percent since July 15.

The Aussie rose 0.2 percent to $1.0859 and was up 1.9 percent this week. The kiwi dollar gained 0.1 percent to 86.38 U.S. cents, and is set for a five-day gain of 2.2 percent.

Australia’s import prices increased 0.8 percent in the second quarter from the previous three months, the Bureau of Statistics said. Economists surveyed by Bloomberg News forecast a 1.1 percent drop. Export prices rose 6 percent. Consumer prices increased 3.4 percent in the second quarter from a year earlier, the most since December 2008, according to economist estimates compiled by Bloomberg. The report is due July 27.

The market is “too far in terms of the expectations for RBA cuts,” said Todd Elmer, head of Group-of-10 currency strategy for Asia ex-Japan at Citigroup Inc. in Singapore. “We think that the next move is actually going to be a hike, not a cut.”

--With assistance from Joe Ragazzo in New York. Editors: Rocky Swift, Dave Liedtka

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

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


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