Bloomberg News

Aussie Touches 4-Month High After Building Data

July 31, 2012

Australia’s dollar touched its highest level in four months after a report showed the nation’s building approvals decreased by less than economists expected.

The so-called Aussie gained versus most major counterparts on prospects the Reserve Bank of Australia will leave unchanged the highest borrowing costs among major developed economies at a meeting next week and as Asian stocks rose. The Australian and New Zealand dollars are set to close out a second monthly gain against the greenback as the Federal Reserve begins its two-day policy meeting today amid speculation it will consider expanding monetary stimulus.

“The Australian dollar is being supported because of the less-than-expected fall in building approvals,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The RBA is still quite cautious about what’s happening in the euro zone, but on the other hand, they’re still saying the domestic economy is still pretty resilient.”

The Australian dollar climbed 0.1 percent to $1.0517 as of 4:22 p.m. in Sydney after earlier touching $1.0537, the strongest level since March 27. The Aussie rose 0.2 percent to 82.26 yen. New Zealand’s currency gained 0.1 percent to 80.97 U.S. cents and reached 81.13 cents, the highest since May 2. The so-called kiwi added 0.2 percent to 63.34 yen.

Australia’s 10-year government bond yield fell two basis points, or 0.02 percentage point, to 3.11 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose one basis point to 2.78 percent.

The MSCI Asia Pacific Index (MXAP) of stocks advanced 0.9 percent.

Building Permits

The number of permits granted to build or renovate houses and apartments declined 2.5 percent in June after rising a revised 27 percent in the previous period, the Bureau of Statistics said today. The result compares with the median forecast of a 15 percent drop in a Bloomberg News survey of economists.

RBA officials will meet on Aug. 7 for a policy decision after keeping the overnight cash rate target at 3.5 percent in their previous two gatherings. Interest-rate swaps data compiled by Bloomberg show a better than 70 percent chance the central bank rate will be unchanged next week, up from odds of 23 percent a week earlier.

“While external conditions hold various risks to the Australian dollar, the domestic economic situation does not look too adverse,” Mitul Kotecha, head of global currency strategy at Credit Agricole CIB in Hong Kong, wrote in a report today. “An eventual correction in the markets’ overly dovish stance will help to support the Australian currency, given its strong sensitivity to interest-rate expectations.”

Monthly Gains

The Aussie has advanced versus all of its major peers this month, rising 2.7 percent against the dollar and gaining 0.7 percent versus the yen. The kiwi has added 1.1 percent against its U.S. counterpart since June 30 and lost 0.9 percent versus Japan’s currency.

Fed officials will begin a two-day gathering today after they refrained from introducing a third round of asset purchases at their session last month. Chairman Ben S. Bernanke said this month the central bank is considering a range of further options to ease policy in case the faltering economic recovery fails to lower unemployment.

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

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


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