Bloomberg News

Australian, N.Z. Dollars Rally on Asian Stocks Gain After Summit

January 31, 2012

Jan. 31 (Bloomberg) -- The Australian and New Zealand dollars rallied from one-day declines as Asian stocks advanced after European leaders signaled they’re taking steps toward resolving to the region’s debt crisis.

The so-called Aussie gained versus most major counterparts after Greek Prime Minister Lucas Papademos said he’s “strongly committed” to reaching a debt-swap accord. The currency also rose after a gauge of Australian business confidence climbed to a seven-month high. New Zealand’s dollar climbed against 15 of its 16 most-traded peers after a report showed home-building approvals rebounded in the nation.

Papademos’s comments “show that something is happening,” said Lee Wai Tuck, a currency strategist at Forecast Pte. in Singapore. “There are still buyers on dips and that’s why the Aussie is being supported, but I still prefer to sell on rallies.”

Australia’s dollar advanced 0.3 percent to $1.0632 at 4:19 p.m. in Sydney from yesterday, when it fell 0.6 percent. It rose 0.1 percent to 81.02 yen. New Zealand’s currency rallied 0.5 percent to 82.33 U.S. cents after declining 0.7 percent yesterday. The so-called kiwi gained 0.3 percent to 62.75 yen.

The Aussie is set for a 4.1 percent advance against the dollar this month, while its New Zealand counterpart is headed for a 5.9 percent gain. The MSCI Asia Pacific Index of shares rose 0.3 percent today.

Australian benchmark 10-year bonds fell two basis points, or 0.02 percentage point, to 3.72 percent. New Zealand’s two- year swap rate, a fixed payment made to receive floating rates, was little changed at 2.76 percent.

More Greek Austerity

Papademos said major progress had been made in debt-swap talks with bondholders. Representatives of the European Commission, the European Central Bank and the International Monetary Fund, collectively known as the troika, want more fiscal tightening and wage cuts, he told reporters in Brussels.

A confidence index in Australia was at 3 last month from 2 in November, according to a National Australia Bank Ltd. survey of about 400 companies from Jan. 9-13 that was released in Sydney today. That was the highest since May.

“To some degree, it does confirm that the Australian economy is still in reasonably good shape,” Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney and a former central bank official, said in an interview on Bloomberg Television’s “First Up” with Susan Li.

Rate Cut Bets

“The Reserve Bank certainly has the option to cut interest rates,” Bloxham said. “These sorts of numbers tell them that they may not be in a rush. We still think that on the margin they will decide to cut rates” at the bank’s Feb. 7 meeting, he said.

Traders see a 60 percent chance that the RBA will lower borrowing costs by 25 basis points when policy makers gather next week, cash rate futures show. Australia’s benchmark rate is currently at 4.25 percent after back-to-back reductions at the central bank’s last two meetings.

The Australian dollar has appreciated 2 percent in the past month, while its New Zealand counterpart gained 4 percent in the same period, according to Bloomberg Correlation-Weighted Indexes. The two currencies are the best performers among the 10 developed-nation peers tracked by the gauge.

New Zealand home-building approvals increased 2.1 percent in December from the month before, when they dropped a revised 6.2 percent, the statistics bureau said in Wellington today. The median estimate of economists surveyed by Bloomberg News was for an 8 percent gain.

Lending to households in the South Pacific nation rose 0.1 percent in December, according to central bank figures. Lending growth was 1.1 percent from a year earlier, compared with 1 percent in November, which was the slowest pace since records began in 1991.

--Editors: Rocky Swift, Naoto Hosoda

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

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


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