Bloomberg News

Aussie Set for Weekly Gain on Signs of Improving Economy

October 19, 2012

Australia’s dollar headed for its biggest weekly gain in more than a month as signs of improvement in the global economy supported demand for riskier investments.

The so-called Aussie traded 0.4 percent from its strongest in three weeks before data today forecast to show U.S. sales of existing homes hovered near a two-year high. Figures yesterday showed gains in China’s industrial production, retail sales and fixed-asset investment. The appeal of the Australian and New Zealand currencies was also supported after Pacific Investment Management Co., manager of the world’s biggest bond fund, said it has boosted holdings in the South Pacific nations’ assets.

“Recent data have been easing pessimism over growth in the U.S. and China, supporting the Aussie,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “There is a risk that the Australian dollar has gained too much in a short period of time.”

Australia’s currency was little changed at $1.0365 as of 4:20 p.m. in Sydney from the close yesterday, when it reached $1.0412, the highest since Sept. 28. It has appreciated 1.3 percent this week. The Aussie bought 82.25 yen from 82.17. It touched 82.52 yesterday, the strongest since Sept. 19.

The Australian dollar’s 10-day relative strength index versus its Japanese counterpart was at 64.6, nearing the 70 level that some traders see as an indication that an asset may retreat after rising too quickly. The equivalent gauge against the greenback held at 58.4.

New Zealand’s dollar, nicknamed the kiwi, fetched 82 U.S. cents, 0.2 percent higher than yesterday’s close.

U.S. Housing

U.S. purchases of previously owned houses slid 1.7 percent to a 4.74 million annual rate in September, after they increased to the most since May 2010 in the previous month, according to the median forecast of economists in a Bloomberg News survey. The National Association of Realtors will release the figures today. A separate report due Oct. 24 is expected to show a 2.7 percent gain in new home sales in September.

Chinese data released yesterday showed industrial production increased 9.2 percent in September from a year earlier, retail sales advanced 14.2 percent and fixed-asset investment excluding rural households rose 20.5 percent in the first three quarters. China’s gross domestic product expanded 7.4 percent during the third quarter from a year earlier.

The nation is Australia’s largest trading partner and New Zealand’s second-biggest export market.

Australian 10-year bond yields dropped four basis points, or 0.04 percentage point, to 3.19 percent. The rates yesterday touched 3.24 percent, the most since Sept. 24. The MSCI Asia Pacific Index of regional shares dropped 0.3 percent today, paring this week’s gain to 2.2 percent.

Pimco Buying

Decisions in larger developed economies to keep policy rates close to zero and engage in currency market intervention have helped push the Australian and New Zealand dollars higher, according to Scott Mather, head of global portfolio management at Pimco, which oversees $1.8 trillion in assets. The Newport Beach, California-based company’s holdings in the region are at the highest levels “in a very long time,” he said at a briefing in Auckland.

“Rates will continue to fall in this region, in Australia and New Zealand,” Mather said in a conference call. “It’s partially the reflection of weak global growth and partially in response to an abnormal amount of currency strength relative to what history would tell you we should have.”

The Reserve Bank of Australia has the highest benchmark rate among major developed economies, even after reducing it by 1.5 percentage points over the past year to 3.25 percent. The Reserve Bank of New Zealand’s key rate is a record-low 2.5 percent. Higher yields, safe-haven flows and buoyant global commodities demand have helped push the South Pacific currencies above their 20-year averages.

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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