Bloomberg News

Aussie Gains Versus Yen in Longest Win Stretch Since 2003; Kiwi Advances

February 24, 2012

Australia’s dollar rose for an eighth straight week against the yen, the longest winning streak since 2003, as Reserve Bank Governor Glenn Stevens’s comment that monetary policy is “about right” reduced speculation interest rates will be cut.

New Zealand’s dollar, called the kiwi, also rallied for an eighth week versus the yen, its longest run in more than a decade, as an unexpected jump in U.S. consumer confidence added to demand for higher-yielding currencies. The Aussie erased daily gains versus its U.S. counterpart after Fitch Ratings downgraded three of the nation’s four so-called pillar banks.

The Australian dollar has been “very well-supported over the last couple of weeks,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The local interest-rate market removed those expectations for further policy easing, and that’s been reflected in the currency.”

The Aussie strengthened 1.7 percent this week to 86.60 yen, rising 1 percent today and touching 86.74 yen, the highest level since July 11. Australia’s dollar last posted a weekly loss against the Japanese currency on Dec. 30. It hasn’t gained for so long since 16 weeks ended in 2003. The Aussie was little changed for the week and the day against the U.S. currency at $1.0712.

New Zealand’s dollar advanced 2.2 percent this week to 67.67 yen, appreciating 1.2 percent today and touching 67.79 yen, the strongest since Aug. 4. Its longest winning streak before this week ended in 2001. The kiwi rose 0.6 percent this week to 83.71 U.S. cents. It was little changed today versus the greenback.

‘Growth Near Trend’

The Standard & Poor’s 500 Index of U.S. stocks gained 0.3 percent today, and the MSCI World Index (MXWO) of stocks in developed nations advanced 0.6 percent.

“With growth near trend, inflation consistent with the target, interest rates about average and an outlook suggesting more of the same, the setting of policy was about right for the moment,” Stevens, the Australian central-bank chief, said today in testimony in Sydney to the House of Representatives Standing Committee on Economics.

Stevens and the Reserve Bank board unexpectedly kept Australia’s benchmark interest rate unchanged at 4.25 percent on Feb. 7 after making two quarter-percentage point cuts in the final months of 2011. Traders expect the RBA to reduce borrowing costs by 43 basis points, or 0.43 percentage point, over the next 12 months, according to a Credit Suisse Group AG index based on swaps. That’s down from 104 basis points in predicted cuts on Feb. 1.

Bank Downgrades

Australia’s currency pared earlier gains versus the dollar after Fitch reduced the ratings of Commonwealth Bank of Australia, Westpac Banking Corp. (WBC) and National Australia Bank Ltd. (NAB) by one level to AA- from AA. It reaffirmed the AA- rating of Australia & New Zealand Banking Group Ltd.

Fitch’s moves follow downgrades by Moody’s Investors Service in May and Standard & Poor’s in December, and reflect the lenders’ reliance on offshore funding markets. Australia’s pillar banks, so named for a law that prevents them buying each other, derive about 40 percent of their total funding from wholesale markets.

The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment rose to 75.3 this month from 75 in January. A Bloomberg News survey called for 73. The gauge averaged 89 in the five years before the 18-month recession that ended in June 2009.

To contact the reporter on this story: 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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