Bloomberg News

Aussie, Kiwi Remain Higher as Stocks, Commodities Rise

May 29, 2012

The Australian and New Zealand dollars remained higher after gaining yesterday as Asian stocks rose, boosting demand for higher-yielding assets.

The so-called Aussie and kiwi climbed versus most of their major counterparts as commodities advanced and futures signaled U.S. equities are poised to strengthen. Both South Pacific nations’ currencies headed for monthly declines against the U.S. dollar before reports this week that may show euro area consumer confidence remained weak and the jobless rate rose across the 17 nation bloc, boosting speculation the Europe’s fiscal turmoil is hurting growth.

“Stock markets have now started to stabilize,” said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia. “That’s helped the Aussie and kiwi to form a bottom and tick up a little bit.”

Australia’s dollar added 0.2 percent to 98.74 U.S. cents as of 4:32 p.m. in Sydney after rising 1 percent yesterday, its biggest one-day gain since April 12. The Aussie climbed 0.3 percent to 78.50 yen. New Zealand’s currency was up 0.1 percent at 76.27 cents after advancing 1.1 percent yesterday. It gained 0.1 percent to 60.64 yen.

Australia’s bonds rallied, pushing 10-year yields down four basis points, or 0.04 percentage point, to 3.14 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, climbed two basis points to 2.5 percent.

Stocks, Commodities Gain

The MSCI Asia Pacific Index (MXAP) of shares rose 1.2 percent after earlier falling as much as 0.6 percent. Standard & Poor’s 500 Index futures climbed 0.9 percent.

Oil gained for a third day, advancing 0.7 percent. Copper prices added 0.4 percent.

In Australia, a private report by the Housing Industry Association showed sales of newly built homes rose 6.9 percent last month to 5,816, the biggest increase in more than two years. That compares with a 9.4 percent drop to a record low in March, according to the data.

The kiwi has dropped 6.8 percent versus the dollar since April 30, the worst performance among 16 major counterparts of the U.S. dollar, according to data compiled by Bloomberg. The Aussie has fallen 5.3 percent.

An index of consumer confidence in the euro area was at minus 19.3 in May, from minus 19.9 in April, according to a Bloomberg News survey before the final reading is released tomorrow. The jobless rate probably climbed to 11 percent in April, the highest in data compiled by Bloomberg going back to 1990, economists forecast in a separate survey before the June 1 report.

The extra yield investors demand to hold Spain’s 10-year bonds instead of similar-maturity German notes soared to 5.12 percentage points yesterday, the most since 1995, according to data compiled by Bloomberg.

Under Stress

“The uncertainty in Europe and the unknown of how governments are going to fund the recapitalization of banks are impacting the Aussie,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “It’s pretty clear that several periphery countries are under a lot of stress already.”

Standard Chartered Plc lowered its forecasts for the Australian currency and sees it at 96 cents in the three months ending June 30 from an earlier prediction of $1.03. The Aussie dollar will be at 99 U.S. cents by year-end, down from a previous estimate of $1.10, it said in a note yesterday. The bank also reduced its estimate for the kiwi and sees it at 75 cents in the fourth quarter, compared with an earlier projection of 88 cents.

Australia’s dollar has declined 1.8 percent this year, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Its New Zealand counterpart dropped 0.2 percent.

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

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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