Bloomberg News

Aussie Dollar, Bond Yields Rise on Retail Sales; Kiwi Declines

September 01, 2011

Sept. 1 (Bloomberg) -- The Australian currency strengthened for a sixth day against the yen, the longest winning streak since April, and bond yields increased after a report showed retail sales rose more than economists forecast.

The South Pacific currency reached its strongest level in four weeks versus the U.S. dollar as traders lowered bets on interest-rate cuts by the Reserve Bank of Australia. New Zealand’s currency, called the kiwi, fell for the first time in five days against the greenback after a private report showed prices for the nation’s commodities declined last month.

The Aussie is supported as “the market moves to price in a sensible track for the RBA,” said Matthew Johnson, a strategist at UBS AG in Sydney. “This data will push yields higher because it reminds the market that what’s priced in is unrealistic.”

Australia’s dollar rose 0.7 percent to 82.66 yen at 12:47 p.m. in New York, from 82.08 yen yesterday. It reached 82.83, the strongest since Aug. 5. It gained 0.5 percent to $1.0759, from $1.0707, and touched $1.0765, the strongest since Aug. 4.

New Zealand’s currency was little changed at 65.49 yen, from 65.48 yen. The kiwi slid 0.2 percent to 85.22 U.S. cents.

Yields on the two-year Australian note rose eight basis points, or 0.08 percentage point, to 3.83 percent and touched 3.89 percent, the highest level since Aug. 5.

Retail sales in Australia advanced 0.5 percent in July, the first gain in three months, data from the Bureau of Statistics showed today. Separate figures from the bureau showed business investment rose 4.9 percent in the second quarter from the previous three months.

Rate Cuts

A Credit Suisse Group AG index based on swaps trading showed traders are betting the RBA’s benchmark 4.75 percent target rate will be cut by 111 basis points over 12 months. That compares with reductions of 123 basis points projected yesterday and 154 points estimated on Aug. 22.

RBA Governor Glenn Stevens has kept the rate unchanged for eight policy meetings to gauge the economic fallout from Europe’s debt crisis. Policy makers meet next on Sept. 6.

The kiwi declined after a report showed that the value of New Zealand’s commodity prices fell for a third month and as a Chinese manufacturing index stayed near the borderline between expansion and contraction in August.

The ANZ Commodity Price Index dropped 1.2 percent in August from July, when it declined a revised 0.2 percent, according to data released today.

--With assistance from Allison Bennett in New York. Editors: Greg Storey, Dennis Fitzgerald

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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


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