New Zealand’s dollar rose, paring yesterday’s steepest drop against the yen in almost five months, as a rally in Asian shares and commodities supported demand for higher-yielding currencies.
The so-called kiwi ended a two-day drop against the dollar after food prices climbed in June, giving the Reserve Bank of New Zealand more reason to raise interest rates this year. The Australian dollar halted a three-day slide versus the greenback after China, its largest trading partner, said its economic growth slowed, easing concerns of further monetary tightening.
“We continue to see key commodity prices continuing to make gains and Asian equity markets being on a slightly better footing today, providing some support in today’s trading,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG.
New Zealand’s currency rose to 65.35 yen as of 1:35 p.m. in Sydney from 64.82 yen in New York yesterday. It earlier sank to as low as 64.15, its weakest since May 23. The so-called kiwi advanced to 82.25 U.S. cents from 81.81 cents yesterday, when it dropped to 81.11, its lowest since June 29.
Australia’s dollar strengthened to 84.47 yen from 83.98 yen, after earlier touching 83.18, its weakest since March 25. It was at $1.0634 from $1.0598.
The MSCI Asia Pacific Index of regional shares rose 0.8 percent. The Thomson Reuters/Jefferies CRB Index of 19 Raw Materials advanced 1.1 percent yesterday.
Food Prices
New Zealand’s food prices rose 1.4 percent in June after gaining 0.5 percent the previous month, according to data released today. That’s the fastest growth since January.
Australia’s dollar advanced after China’s statistics bureau said gross domestic product expanded 9.5 percent from a year earlier, after a 9.7 percent gain in the first quarter.
“Generally the data in China has been consistent with a gradual slowdown in activity, which is good news for currencies in the region,” said Richard Yetsenga, global head of foreign- exchange strategy at Australia & New Zealand Banking Group Ltd. The Aussie and the kiwi “are going to appreciate over the course of the day.”
Chinese Premier Wen Jiabao said yesterday that stabilizing prices remains the nation’s top priority, while officials also aim to avoid “big fluctuations” in growth.
Consumer Confidence
Gains in the Aussie dollar were limited on speculation a drop in consumer confidence may encourage the Reserve Bank of Australia to cut interest rates.
Australia’s sentiment index dropped 8.3 percent to 92.8 in July from a month earlier, the lowest since May 2009 and the biggest decline since October 2008, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers taken July 4-9 and released today in Sydney.
Today’s report provides “further justification for the RBA to ‘do nothing’ with monetary policy for several more months,” Roland Randall, senior strategist at TD Securities Inc. in Singapore, wrote in an e-mailed note to clients. The central bank “will wait for actual evidence that the consumer is back in play before it considers increasing interest rates.”
Swaps traders are pricing in a 39-basis-point cut to the central bank’s key rate during the next 12 months, a Credit Suisse AG index showed today. As recently as June 15, the gauge signaled 14 basis points of tightening.
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
