Bloomberg News

Aussie Touches Week High as House Approves Budget Bill

January 02, 2013

The Australian dollar advanced to its strongest level in more than a week as U.S. lawmakers passed a budget bill to avert the so-called fiscal cliff threatening the world’s biggest economy.

The Aussie dollar gained versus most of its 16 major counterparts as President Barack Obama said he will sign the bill into law, which will undo income tax increases for more than 99 percent of households. New Zealand’s currency touched the highest in two weeks, reversing an earlier decline, as the resolution of the U.S. impasse helped propel Asian stocks.

“Now we’ve got a bit more clarity and the potential uncertainty has been removed somewhat,” said Peter Dragicevich, a Sydney-based currency economist at Commonwealth Bank of Australia, the nation’s largest lender. “The environment would be pretty positive for risk assets on the day,” including the Aussie, he said.

The Australian dollar rose 0.8 percent to $1.0481 as of 5:19 p.m. in Sydney after earlier climbing to $1.0494, the highest since Dec. 20. It advanced 1.5 percent to 91.47 yen. The yield on Australia’s 10-year bond increased 13 basis points, or 0.13 percentage point, to 3.40 percent, the biggest one-day increase since September.

New Zealand’s currency gained 0.9 percent to 83.61 U.S. cents, and touched 83.97, the strongest since Dec. 19. The so- called kiwi surged 1.5 percent to 72.97 yen.

Asian stocks rallied, with the MSCI Asia Pacific Index excluding Japan (MXAPJ) rising 1.9 percent. Japanese markets are shut for a holiday.

The U.S. House of Representatives passed the budget legislation with a 257-167 vote last night in Washington. Republicans vowed to fight President Obama in coming weeks for spending cuts in exchange for raising the nation’s debt ceiling. Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar 2011 episode that led to a downgrade of the U.S. credit rating.

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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