BLBG:Aussie, New Zealand Dollars Advance for Fourth Day on European Optimism
The Australian and New Zealand dollars rose for a fourth day against the U.S. currency on optimism European policy makers are moving to insulate banks from the region’s sovereign debt crisis.
The so-called Aussie rose against 15 of its 16 most-traded peers after the European Central Bank yesterday reintroduced yearlong loans for banks and the Bank of England boosted its asset-purchase program. German Chancellor Angela Merkel and French President Nicolas Sarkozy meet Oct. 9 amid speculation leaders are discussing possible bank recapitalizations. Both currencies are poised for weekly gains against the dollar and yen as Asian stocks rose for a second day.
“The market has taken great confidence from the moves by the ECB and BOE and also the realization that politicians are getting a handle on the underlying issue, being bank capital,” said Darryl Conroy, an analyst at Suncorp Bank in Brisbane. “A number of the commodity currencies have tracked a very similar and positive path on less fear emanating out of Europe.”
Australia’s currency rose to 97.85 U.S. cents as of 3:22 p.m. in Sydney from 97.46 cents in New York yesterday, headed for a 1.3 percent gain this week. It climbed to 74.97 yen from 74.78 yesterday and 74.45 on Sept. 30. New Zealand’s dollar gained to 77.36 U.S. cents from 77.17 cents and bought 59.28 yen from 59.20 yesterday.
The ECB said yesterday it will reintroduce yearlong loans, giving banks access to unlimited cash through January 2013, and resume purchases of covered bonds to encourage lending. At the same time, the European Commission is pushing for a coordinated capital injection into banks.
The MSCI Asia Pacific index of stocks rose 2.7 percent.
Benchmark interest rates are 4.75 percent in Australia and 2.5 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
