Bloomberg News

Aussie Touches 2-Month High Versus Kiwi After N.Z. Retail Sales

November 14, 2012

Australia’s dollar touched a two- month high against its New Zealand counterpart after retail sales in the smaller nation unexpectedly fell.

The so-called Aussie reached the strongest level in a week against the U.S. dollar after reports showed Australia’s consumer confidence rose to a 19-month high. Demand for both South Pacific currencies was limited amid signs that Europe’s debt crisis is hampering the region’s recovery.

“New Zealand’s economy isn’t showing robust growth at present, and the retail sales didn’t help that,” said Hans Kunnen, the chief economist at St. George Bank Ltd. in Sydney. “The pace of economic growth in Australia is firmer, and we expect that to be reflected in the currency market.”

Australia’s dollar touched NZ$1.2799, the highest level since Sept. 10, before trading at NZ$1.2788 as of 4:48 p.m. in Sydney, unchanged from yesterday. It rose to $1.0455, the strongest since Nov. 7, before trading at $1.0448, 0.1 percent higher. The Aussie advanced 0.3 percent to 83.08 yen. New Zealand’s currency added 0.1 percent to 81.70 U.S. cents and climbed 0.3 percent to 64.97 yen.

Retail sales, adjusted for inflation, dropped 0.4 percent in the three months through September from the second quarter, when they rose 1.3 percent, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey was for a 0.4 percent increase.

In Australia, a consumer sentiment index for November gained 5.2 percent to 104.3, the highest since April 2011, a Westpac Banking Corp. (WBC) and Melbourne Institute survey showed today in Sydney. Readings above 100 indicate optimists outnumber pessimists

‘Wage Pressure’

The nation’s wage price index increased 0.7 percent in the third quarter from the prior three-month period, according to the Australian Bureau of Statistics.

“If there is excessive wage pressure, it will make the RBA more reluctant to ease further,” said St. George’s Kunnen, referring to the Reserve Bank of Australia. “Current expectations are for interest rates to be cut either in December or February and if doubt is thrown on that, that would provide some short-term boost to the Aussie.”

Interest-rate swaps data compiled by Bloomberg show traders see a 66 percent chance the RBA will lower its benchmark to 3 percent next month.

“The Australian dollar is strong,” said Yoshiko Takayasu, the Tokyo-based head of corporate sales for National Australia Bank Ltd. “There’s a 50-50 chance of a December rate cut. The Aussie could test higher if the RBA refrains from easing.”

Best Performer

The Australian dollar rose 3.4 percent in the past month, the best performer among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi gained 1.1 percent in the same period.

The so-called Aussie and kiwi were also buoyed as volatility ebbed, making investments more attractive in currencies with higher lending rates. The JPMorgan G7 Volatility Index sank to 7.2 percent matching yesterday’s low which was the least since October 2007.

Australia’s government bonds were little changed, with the benchmark 10-year note yielding 3.06 percent.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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


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