Australia’s dollar held a rebound from a three-week low against its New Zealand counterpart as traders pared bets for interest-rate cuts after retail sales in the larger nation climbed by the most in more than three years.
The so-called Aussie gained for a second day against New Zealand’s kiwi dollar after government data showed that retail sales jumped 1.3 percent in February and building approvals rebounded. Both South Pacific currencies fell against the dollar and surged against the yen after the Bank of Japan (8301) expanded monetary stimulus.
“The retail sales number was extremely strong,” said Alvin Pontoh, an Asia-Pacific strategist at TD Securities Inc. in Singapore. “It justifies the move higher in the Aussie. The Reserve Bank of Australia said this week that there are signs the economy is responding to previous easing of monetary policy and we’re clearly seeing that evidence today.”
The Australian dollar rose 0.1 percent to NZ$1.2435 at 5:42 p.m. in Sydney from yesterday, when it also added 0.1 percent. The pair touched NZ$1.2396 on April 2, the lowest since March 8. The Aussie fell 0.3 percent to $1.0431, and New Zealand’s currency lost 0.3 percent to 83.89 U.S. cents.
Australia’s dollar jumped 2.1 percent to 99.44 yen and New Zealand’s surged 2.1 percent to 79.96 yen.
The advance in Australia’s retail sales beat the 0.3 percent advance predicted by the the median forecast in a Bloomberg News survey of economists and was the biggest back-to- back gain in almost four years.
Separate reports showed building approvals rebounded 3.1 percent in February from a revised 2.0 percent drop in January, and a measure of the services industry advanced to the highest level in 14 months.
“There are a number of indications that the substantial easing of monetary policy during late 2011 and 2012 is having an expansionary effect on the economy,” Reserve Bank of Australia Governor Glenn Stevens said in a statement on April 2 after leaving the overnight cash-rate target at 3 percent for a third month.
The RBA cut the key rate by 1.75 percentage points in the 14 months through December.
“Monetary policy is working,” Paul Bloxham, chief Australia economist at HSBC Holdings Plc in Sydney and a former RBA economist, said in a Bloomberg Television interview today. “We think the RBA’s easing phase is done, and the next move might be up.”
Interest-rate swaps data compiled by Bloomberg show traders see a 16 percent chance the RBA will cut the benchmark rate at its next meeting on May 7, compared with 57 percent odds priced in one month ago.
The Australian and New Zealand dollars slipped as the U.S. currency strengthened after the Bank of Japan expanded monetary stimulus. In the first policy meeting led by Governor Haruhiko Kuroda, the central bank increased monthly bond purchases to 7 trillion yen ($73 billion) and agreed to buy longer maturities as it aims to achieve 2 percent annual inflation within two years.
“The BOJ certainly met and beat market expectations,” said Robert Rennie, the chief currency strategist in Sydney at Westpac Banking Corp. (WBC) “The euro, sterling and Aussie to a lesser extent have moved lower against the U.S. dollar after the BOJ decision. That’s partly because of U.S. dollar gains.”
The European Central Bank and Bank of England also decide on monetary policy today as they struggle to revive growth.
Benchmark interest rates of 3 percent in Australia and 2.5 percent in New Zealand compared with reflationary policies in the U.S., Europe and Japan will support the Aussie and kiwi dollars, according to Carrick Lucas, a strategist at ANZ National Bank Ltd. in Wellington.
“There’ll be a lot more money flowing around in Asia markets” with the BOJ expanding stimulus, he said. “Over time that flows out into global sovereign bond markets,” particularly Australia and New Zealand.
Australia’s 10-year bond yields fell three basis points, or 0.03 percentage point, to 3.4 percent after earlier dropping to 3.35 percent, the lowest since March 5.
“The sustained strength of our dollar is now a feature of the economic landscape,” Australian Prime Minister Julia Gillard said today in a speech in Sydney. “It may persist for some time, given Australia’s status increasingly as something of a safe-haven currency.”
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