Bloomberg News

Aussie Touches 5-Month High as Stocks Rally Spurs Yield Demand

February 02, 2012

Feb. 2 (Bloomberg) -- The Australian dollar touched a five- month high against its U.S. counterpart after a report showed the nation’s trade surplus increased, exceeding analyst expectations. The New Zealand dollar gained for a third day.

The so-called Aussie and kiwi rose after data yesterday showed manufacturing in China and the U.S. expanded, while a similar European gauge topped an initial reading. Asian equities extended gains as concerns that Europe’s debt crisis may worsen weren’t enough to damp investor appetite for higher-yielding assets.

“The market has taken an overly optimistic view” of global manufacturing data, said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “The so-called risk currencies like Aussie and kiwi can be very well- supported.”

Australia’s dollar added 0.1 percent to $1.0713 at 2:01 p.m. in New York. It earlier rose as high as $1.0757, the strongest level since Sept. 1. The Aussie was little changed against its Japanese counterpart at 81.54 yen.

New Zealand’s currency advanced 0.1 percent to 83.34 U.S. cents. It touched 83.70 cents yesterday, the strongest level since Sept. 9. The kiwi was also little changed against the Japanese currency at 63.48 yen. Demand for the currency was limited after whole-milk powder prices fell for the fourth- straight auction, according to Fonterra Cooperative Group Ltd.

Australian 10-year bonds fell, pushing yields up four basis points, or 0.04 percentage point, to 3.72 percent. The rate fell to 3.648 percent yesterday, matching the record low reached on Dec. 30. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose two basis points to 2.79 percent.

Stock Gains

The MSCI Asia Pacific Index of shares rose 1.2 percent, following yesterday’s 0.1 percent gain for the Standard & Poor’s 500 Index and a 0.2 percent advance for the Stoxx Europe 600 Price Index.

Australia’s exports exceeded imports by A$1.7 billion ($1.8 billion) in December after a surplus of A$1.3 billion in November, a report by the statistics bureau showed today. That compares with a median estimate for a A$1.2 billion surplus in a Bloomberg News survey of economists before the data was released.

“We’ve seen a further move higher in the Aussie dollar on the back of the trade balance data,” said Hamish Pepper, assistant vice president in Singapore at Barclays Capital.

“There’s room for a move lower and the catalyst for that could well be the RBA rate decision that we get next week,” he said, referring to the Reserve Bank of Australia’s Feb. 7 policy meeting.

Rate Cut Bets

Traders see a 58 percent chance that officials will lower borrowing costs by a quarter of a percentage point, cash-rate futures show. Barclays expects a 25-basis-point reduction next week and a further 50 basis points of cuts by mid-year, Pepper said.

Australia’s benchmark lending rate currently stands at 4.25 percent, while New Zealand’s official cash rate is 2.5 percent. That compares with key rates that are near zero in the U.S. and Japan. The South Pacific nations’ higher yields attract investors, although the risk in such trades is that currency market moves will erase profits.

The Australian dollar has appreciated 2.4 percent in the past month, while its New Zealand counterpart has gained 5 percent over the same period, according to Bloomberg Correlation-Weighted Indexes. They are the best performers among the 10 developed-nation currencies tracked by the gauge.

The Institute for Supply Management’s manufacturing index, a measure of output in the U.S., rose to 54.1 last month from 53.1 in December. A similar Chinese purchasing managers’ index climbed to 50.5 from 50.3 over the same period, while the euro- area gauge jumped to 48.8 from 46.9 the previous month, topping a preliminary reading of 48.7.

Milk powder for April delivery was $3,495 a metric ton, the lowest since Oct. 18, according to results on Fonterra’s GlobalDairyTrade website. The Auckland-based company is the world’s largest dairy exporter and accounts for about 40 percent of the global dairy-product trade.

--Editor: Kenneth Pringle

To contact the reporters on this story: Austen Sherman in New York at asherman18@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net

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


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