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July 3 (Bloomberg) --Australia’s dollar advanced after data showed the nation’s home building approvals surged in May, adding to signs that the economy is gaining momentum.
The so-called Aussie pared gains after reaching a two-month high as the Reserve Bank of Australia kept interest rates unchanged and said a subdued international outlook means the stance of monetary policy remains appropriate. New Zealand’s dollar climbed against the yen as Asian stocks rose for a fifth day, boosting demand for higher yielding currencies.
“Our view is still for further cuts but the RBA will be on hold in the near term to see how things will play out,” said Khoon Goh, a senior foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “The Aussie currency came off a little bit as the statement wasn’t hawkish from the market’s point of view.”
Australia’s dollar traded at $1.0261 at 3:53 p.m. in Sydney from $1.0249 at the close in New York yesterday, after earlier touching $1.0285, the strongest since May 3. The so-called Aussie rallied 0.4 percent to 81.84 yen. New Zealand’s currency fetched 80.42 U.S. cents from 80.37, and bought 64.14 yen, 0.4 percent higher than the close yesterday.
Australia’s bonds reversed earlier losses. Yields on the benchmark 10-year notes slid three basis points, or 0.03 basis point, to 3.16 percent, after gaining as much as three basis points. The MSCI Asia Pacific Index of shares climbed 0.7 percent, rising for a fifth day.
Reserve Bank of Australia Governor Glenn Stevens and his board left the overnight cash-rate target at a 2 1/2-year low of 3.5 percent today, saying its recent reductions in borrowing costs will help the economy weather a more subdued global outlook. The decision was predicted by all 28 economists surveyed by Bloomberg News.
The number of permits granted to build or renovate houses and apartments in Australia jumped by a record 27.3 percent in May from April, when they declined a revised 7.6 percent, the Bureau of Statistics said in Sydney today.
“The domestic economic outlook in Australia is certainly looking a touch firmer on the basis of this data,” Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. (WBC), Australia’s second-biggest lender, said of the building permits report. “It will reduce the odds of a rate cut at the August meeting, and then that should definitely support the currency further from here.”
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