BLBG: Australian Dollar Gains From Six-Week Low After Business Investment Rises
Australia’s dollar rose from a six- week low against the greenback after a report showed business investment increased by more than economists forecast.
The New Zealand dollar gained to the highest level in three weeks after interest.co.nz reported that China Investment Corp. plans to invest in the South Pacific nation. The so-called Aussie and kiwi dollars extended gains as rising commodities boosted demand for higher-yielding assets.
“Today’s stronger-than-expected capex data is very much the reason for the higher Aussie dollar bias,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “The outlook is very bullish and I suspect that’s why the Aussie dollar continues to push higher on the back of that data. It’s a bit of a ‘risk-on’ day.”
Australia’s dollar appreciated to $1.0588 as of 2:53 p.m. in Sydney from $1.0532 yesterday in New York, when it fell to $1.0441, the weakest since April 13. The currency gained 0.4 percent to 86.64 yen. New Zealand’s dollar advanced 1 percent to 80.69 U.S. cents, after reaching 80.77, the highest since May 2, and climbed 0.8 percent to 66.00 yen.
The MSCI Asia Pacific Index of shares increased 1.4 percent, the biggest gain this month. The Thomson Reuters/Jefferies CRB Index of 19 raw materials gained 1.6 percent yesterday.
Australian capital spending climbed 3.4 percent in the three months to March 31, the government statistics agency said in Sydney. The median forecast in a Bloomberg News survey of economists was for a 2.7 percent increase.
‘Upswing’
“This upswing in business investment will continue to underpin economic activity and lower spare capacity in the economy, causing underlying inflation pressures to build,” Besa Deda, chief economist at St. George Bank in Sydney, wrote in a note to clients. “This upswing supports our view that more tightening from the Reserve Bank is on the cards.”
The Reserve Bank of Australia will boost its benchmark rate by 24 basis points over the next 12 months, a Credit Suisse Group AG index based on swaps showed, compared with a prediction for 22 basis points of increases yesterday.
Demand for the Aussie was also boosted after RBA Deputy Governor Ric Battellino said the strength of the currency reflects demand for the nation’s natural resources in a “very strong” global economy.
China Investment Corp. may have set aside 1.5 percent of its foreign exchange reserves, the equivalent of NZ$6 billion ($4.8 billion), to invest in New Zealand companies, government bonds and other assets, interest.co.nz reported, citing a person it didn’t name. The sovereign investor may have allocated 2 percent of its reserves for Australian assets, the Auckland- based website reported.
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
