Bloomberg News

Aussie Dollar Gains to 7 Week-High on Europe Accord, Kiwi Rises

October 27, 2011

Oct. 27 (Bloomberg) -- The Australian dollar rose to a seven-week high against the greenback after European leaders agreed on a plan to expand a bailout fund to stem the region’s debt crisis, supporting demand for higher-yielding currencies.

The Aussie and New Zealand dollar climbed as an agreement by Greek bondholders to accept 50 percent losses on the debt set global stocks on course for the highest close in almost three months. Demand for the kiwi was supported after Reserve Bank Governor Alan Bollard signaled that borrowing costs may need to rise as the domestic economy rebounds next year.

“We see the Aussie up,” said Roland Randall, an economist at Toronto-Dominion Bank’s TD Securities unit in Singapore. “The headline about Greece sounds positive and that should definitely help sentiment.”

The Australian dollar earlier touched $1.0727, the highest since Sept. 2, before trading at $1.0716 as of 12:38 p.m. in New York. The Aussie gained 2.4 percent to 81.23 yen. New Zealand’s currency advanced 2.4 percent to 82.03 U.S. cents and gained 1.9 percent to 61.18 yen.

The MSCI World Index of stocks rallied 4.1 percent, set for the highest close since Aug. 4. The Standard & Poor’s 500 Index jumped 2.9 percent.

European Accord

European leaders meeting in Brussels persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the rescue fund for indebted nations to 1 trillion euros ($1.4 trillion). Other measures agreed at the summit include a bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt, and a signal from leaders that the European Central Bank will maintain bond purchases in the secondary market.

The New Zealand dollar strengthened for a second day against its U.S. and Japanese counterparts after Bollard said that “gradually increasing pressure on domestic resources will require future official cash rate increases.” The statement followed today’s decision by the RBNZ to leave its benchmark rate unchanged at 2.5 percent.

--With assistance from Catarina Saraiva in New York. Editors: Paul Cox, Ken Pringle

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: Rocky Swift at rswift5@bloomberg.net


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