Bloomberg News

Aussie Rises After GDP Data; Kiwi Gains on Milk Prices

June 06, 2012

Australia’s dollar rose versus all of its 16 major counterparts after data showed the nation’s gross domestic product grew twice as fast as economists forecast.

The so-called Aussie gained for a third day as Asian shares advanced, bolstering demand for higher-yielding assets. New Zealand’s dollar rose after Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said auction prices for whole- milk powder climbed for the first time this year.

“In terms of the domestic outlook I think it’s still positive,” Lee Sue Ann, a Treasury economist at United Overseas Bank Ltd. (UOB) in Singapore, said of the Australian economy. “If there’s any support in the Aussie dollar, that will be because of the divergence of fundamental outlooks” between Australia and the broader global economy.

Australia’s dollar rose to as high as 98.62 U.S. cents, the strongest since May 29, and was at 98.29 at 4 p.m. in Sydney, up 0.9 percent from the close in New York yesterday. New Zealand’s dollar, known as the kiwi, gained 0.6 percent to 76.05 U.S. cents.

The MSCI Asia Pacific Index of shares rose 1.1 percent.

Australia’s economy expanded 1.3 percent in the first three months of this year from the fourth quarter, the Bureau of Statistics said today. It’s the fastest pace since the period ended June last year and compared with the 0.6 percent median estimate from economists in a Bloomberg News survey.

Treasurer Wayne Swan told reporters today that Australia is “outperforming the world” and that the nation is an “island of growth.”

Yield Premiums

The nation’s government bonds dropped, with two-year yields climbing 11 basis points to 2.39 percent. The spread between the rate and similar-maturity Treasury yields in the U.S. narrowed to 1.8 percentage points on June 4, the least since March 2009. Australian 10-year rates rose 10 basis points to 3.04 percent.

“In terms of the interest-rate differentials between Australia and the rest of the world, interest rates are still high,” supporting the Aussie, said Lee.

The GDP report followed a decision by the Reserve Bank of Australia yesterday to cut the benchmark interest rate by 25 basis points to 3.5 percent.

Had the RBA board known of the GDP data, “we suspect that the decision may have been skewed towards pausing and voicing a strong easing bias due to global uncertainty, which was TD’s preference, rather than cut in response to market pricing pressure,” Annette Beacher and Alvin Pontoh, strategists at TD Securities Inc. in Singapore, wrote in a research note today.

Milk powder for August delivery rose 12.3 percent from the May 15 sale, the first gain since Dec. 6, according to a trade- weighted index on Auckland-based Fonterra’s website. The near- term contract rose to $2,784 a metric ton from a 2 1/2 year low two weeks ago, it said.

The auction results were “very strong, so that suggested there’s still demand for commodities,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia (CBA), the country’s biggest lender. “That’s quite a supportive influence on the kiwi.”

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

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


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