Bloomberg News

Aussie, N.Z. Dollars Rise as Stocks Gain Before ECB

December 20, 2011

(Corrects analyst’s name in last paragraph.)

Dec. 21 (Bloomberg) -- The Australian dollar reached a one- week high as Asian equities extended a global stocks rally, boosting demand for higher-yielding assets.

The so-called Aussie gained for a second day before the European Central Bank announces results of its first tranche of unlimited three-year loans amid speculation the facility is spurring purchases of the region’s sovereign debt. Demand for the New Zealand dollar was limited after a report showed the country’s current-account deficit widened as a share of economy more than expected by economists.

“It certainly feels like the risk on appetite will continue throughout the course of Asian session today,” said Matt Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “For the Aussie it will be a gradual grind higher.”

The Australian dollar gained 0.3 percent to $1.0107 at 11:49 a.m. in Sydney from yesterday, and touched $1.0118, the most since Dec. 13. The currency fetched 78.65 yen from 78.52.

New Zealand’s dollar added 0.3 percent to 77 U.S. cents. The so-called kiwi rose 0.2 percent to 59.94 yen.

The MSCI Asia Pacific Index of stocks rose 1.1 percent. The MSCI World Index of stocks rose 2.5 percent yesterday while the Standard & Poor’s 500 Index added 3 percent, its biggest gain this month.

ECB Loans

Italian and Spanish two-year rates have slipped more than one percentage point since ECB President Mario Draghi announced the unprecedented loans on Dec. 8 as investors bet that banks will use the cash to buy government debt.

Economists forecast banks would seek 293 billion euros ($383 billion), according to the median of 14 estimates in a Bloomberg News survey. Results will be announced today and the loans will start tomorrow.

“Take up is expected to be strong” for the loans, Geoffrey Yu, currency strategist at UBS AG in London, in a note to clients. “Markets would interpret this as positive.”

UBS expects the Australian dollar to rise to $1.04 in one month and New Zealand’s currency to advance to 80 U.S. cents in the same time period.

Gains in the New Zealand dollar was limited after a report showed the country’s current deficit widened by more than economists had forecast.

The shortfall was 4.3 percent of gross domestic product in the year ended Sept. 30, from 3.7 percent in the 12 months through June, Statistics New Zealand said in Wellington today. Economists predicted a 3.9 percent gap, according to the median of 11 forecasts in a Bloomberg News survey.

“We had a negative piece of data in the form of a larger- than-expected third-quarter current-account deficit, and that’s taken a little bit of wind out of the kiwi dollar’s sails,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington.

--With assistance from Allison Bennett in New York. Editor: Rocky Swift

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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


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