Bloomberg News

Aussie Touches Highest Since September Before U.S. Jobs

November 02, 2012

Australia’s dollar touched the highest level in more than a month on speculation U.S. data today will show the labor market in the world’s biggest economy is improving, supporting demand for riskier assets.

The so-called Aussie headed for a fourth weekly advance, the longest winning streak since August, as Asian shares rose. Gains in the Australian and New Zealand currencies were limited as Greece’s lawmakers squabbled over austerity measures needed to secure a bailout and keep the nation in the euro.

“Investors are getting more optimistic about the outlook for the U.S. economy,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “The risk-on tone across the market is supporting the Aussie.”

The Australian dollar touched $1.0420, the highest since Sept. 28, before trading at $1.0394 as of 4:25 p.m. in Sydney, down 0.1 percent from the close yesterday. It headed for a 0.2 percent advance this week. The Aussie added 0.1 percent to 83.42 yen, after reaching 83.56, the strongest since Aug. 21. The New Zealand dollar bought 82.63 U.S. cents, having appreciated 0.4 percent since Oct. 26.

The MSCI Asia Pacific Index of shares climbed 0.8 percent, set for a 1 percent gain since Oct. 26 and following a 1.1 percent advance for the Standard & Poor’s 500 Index (SPX) yesterday. Australian bonds declined for the first time this week, pushing the yield on the 10-year note up by six basis points, or 0.06 percentage point, to 3.18 percent.

U.S. Jobs

Implied volatility of three-month options for Group of Seven currencies fell to 7.37 percent, the lowest since October 2007, according to the JPMorgan G7 Volatility Index. A decrease in price fluctuations makes investments in currencies with higher lending rates more attractive because risk becomes smaller that market moves will erase profits on such trades.

In the U.S., data yesterday showed manufacturing expanded more than forecast, consumer confidence rose to a four-year high and fewer Americans filed claims for unemployment benefits, pointing to resilience in the economy.

Figures from the U.S. Labor Department today are expected to show nonfarm payrolls increased by 125,000 workers in October and the jobless rate rose to 7.9 percent, according to the median projections of economists surveyed by Bloomberg.

Demand for the Australian currency was limited as Greek Prime Minister Antonis Samaras’s bid to please lenders from the European Union and International Monetary Fund with a 13.5 billion-euro ($17.5 billion) austerity package and unlock vital funds ran into obstacles this week from coalition partners.

“Concerns surrounding Greece will remain as downside risk for the Aussie,” said FX Prime’s Ueda.

The Aussie strengthened 1.7 percent in the past month, the best performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The New Zealand dollar added 0.1 percent.

Australia’s PPI

Australia’s producer price index advanced 0.6 percent in the third quarter from the prior three months, when it rose 0.5 percent, the Bureau of Statistics said in Sydney today. The median estimate of economists surveyed by Bloomberg News was for a 1 percent increase.

Traders are estimating a 59 percent chance the Reserve Bank of Australia will lower its overnight cash-rate target by a quarter percentage point to 3 percent on Nov. 6, according to data compiled by Bloomberg based on swaps trading. RBA Governor Glenn Stevens cut the key rate by 1.5 percentage points since November last year to 3.25 percent as Europe’s debt crisis threatened global growth.

Australia’s economy can operate with lower interest rates than it has in the past as overseas investors buttress the local currency, helping contain inflation, Treasurer Wayne Swan said yesterday.

“Australia is now seen as a necessary part of any portfolio, whether it be private or public investors -- and these investment flows have propped up our sustained high dollar,” Swan said in a speech in Melbourne yesterday. “This, combined with our fiscal consolidation and contained inflation, has all meant that our economy has more room to run lower rates than we have in the past.”

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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