Bloomberg News

Australian Dollar Reaches Two-Month High on Retail Sales

July 04, 2012

Australia’s dollar touched a two- month high as a government report showed retail sales rose in May, adding to signs of resilience in the nation’s economy.

The so-called Aussie climbed for a fourth day after Reserve Bank of Australia Governor Glenn Stevens said yesterday growth is close to trend and data showed home-building approvals soared by a record in May. New Zealand’s dollar maintained a three-day gain as Asian stocks extended a worldwide rally amid speculation global central banks will act to spur economic growth, boosting demand for higher-yielding currencies.

The sales report “adds to a run of numbers in Australia that have generally been encouraging and beating expectations,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole Corporate & Investment Bank. “That’s positive for the Aussie dollar.”

The currency climbed to $1.0320, the strongest since May 3, before trading at $1.0290 as of 4:24 p.m. in Sydney from $1.0283 in New York yesterday. The Aussie fetched 82.09 yen from 82.05. New Zealand’s dollar rose 0.1 percent to 80.49 U.S. cents, after strengthening 2 percent over the previous three trading sessions. The so-called kiwi was at 64.20 yen from 64.12.

Australia’s 10-year government bond yield climbed five basis points, or 0.05 percentage point, to 3.21 percent.

Retail sales in Australia increased 0.5 percent from April, when they rose a revised 0.1 percent, the Bureau of Statistics said in Sydney today. The median forecast in a Bloomberg News survey of economists was for a 0.2 percent gain.

’Healthy’ Economy

“The key for the Aussie is that the domestic story is still quite healthy as the RBA said in a statement yesterday,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “Overall the Aussie should be fairly well supported. We are on track for $1.0350 as the week progresses.”

The Reserve Bank left the overnight cash-rate target at a 2 1/2-year low of 3.5 percent yesterday, after cutting it by a total of 75 basis points in May and June.

The MSCI Asia Pacific Index (MXAP) of shares added 0.5 percent today. The Standard & Poor’s 500 Index rose 0.6 percent to a two-month high and the Stoxx Europe 600 Index climbed 1 percent yesterday. U.S. markets are closed today for a holiday.

Economists in a Bloomberg poll said the European Central Bank will probably cut interest rates tomorrow to stimulate growth, while the Bank of England is forecast to raise its target for bond purchases the same day. A state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios.

Aussie-Euro

Citigroup Inc. said selling the euro versus the Aussie is still appealing even as the currency pair neared record levels.

“EUR-funded long AUD positions have demonstrated surprising resilience in recent months,” Citigroup strategists Josh O’Byrne and Valentin Marinov wrote in a note to clients yesterday. “We expect this outperformance to continue as long as two conditions persist - first, continued signs of stabilization in Asian economic data and second, low levels of European specific systemic risk.”

An index that tracks returns for so-called carry trades that borrow in euro and invest in the Austrian dollar climbed to 223.4 today, the highest since the common currency’s debut in 1999.

The Aussie gained 0.2 percent to 81.71 euro cents, rising for a fourth day. It reached a record high of 82.42 on Feb. 7.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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