BLBG:New Zealand Dollar Gains on Key’s Election Victory; Aussie Rises on Italy
New Zealand’s dollar rose against its 16 major peers after Prime Minister John Key was re-elected with his party’s biggest mandate in 60 years, strengthening his ability to balance the budget.
The so-called kiwi climbed along with Australia’s dollar after Italian daily La Stampa said the International Monetary Fund is preparing a 600-billion euro ($799 billion) loan for Italy in case the debt crisis worsens, without saying where it got the information. Both South Pacific nations’ currencies were bolstered as Asian stocks rose for the first time in four days, spurring demand for higher-yielding assets.
“The market liked the clean result and the fact that we’re going to have a stable government for the next three years,” Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington, said about the election. “The market took that very positively and the kiwi has managed to do quite well today.”
New Zealand’s dollar rose 1.6 percent to 75.22 U.S. cents as of 12:47 p.m. in Sydney from 74.05 in New York on Nov. 25, when it completed a 2.1 percent five-day decline. It climbed 1.6 percent to 58.40 yen. Australia’s dollar gained 1.5 percent to 98.58 cents and advanced 1.4 percent to 76.53 yen.
New Zealand’s benchmark stock index (NZSE50FG), the NZX 50 Index, rose 0.5 percent to 3228.89.
N.Z. Elections
Key’s National Party won 48 percent of the vote on Nov. 26, up from 45 percent three years ago, allowing him to form the next government with support from political allies in parliament. His administration will focus on advancing the sale of state assets and returning the budget to surplus by 2014-15 or earlier, the 50-year-old leader said in Auckland after the election.
“He can actually hit the ground running and continue with the policies and approach he was taking before,” Craig Brown, a senior investment analyst at Auckland-based fund manager OnePath, said yesterday. That “is important given the volatile financial markets that we’re operating in.”
A confidence index for New Zealand rose to 18.3 in November from 13.2 the previous month, National Bank of New Zealand said in a monthly business outlook survey released today. The results are expressed as the percentage expecting an increase less the percentage of firms expecting a decline.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, rose nine basis points to 2.75 percent after falling to a record 2.6 percent on Nov. 24.
IMF Report
The Australian dollar advanced as much as 1.6 percent against the greenback, the most in four weeks, after La Stampa reported that the IMF money would give Italy’s Prime Minister Mario Monti 12 to 18 months to implement policy changes without having to refinance the country’s existing debt.
German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning a fast-track stability pact to stem the region’s sovereign debt crisis, Welt am Sonntag reported, without saying where it got the information.
“These sort of noises would give the European Central Bank the cover it needs to implement a policy where it is essentially able to be a lender of last resort via IMF packaging, and in conjunction with a stability pact in Europe,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The spike will come in currencies like the Aussie dollar if there’s some credence in it.”
Aid Resources
The report that the IMF is preparing aid of as much as 600 billion euros for Italy in case that nation’s funding woes worsen appeared “wide of the mark,” said Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co.
“The IMF simply does not have the resources,” New York- based Chandler wrote in a note to clients. The Washington-based lender had committed $282 billion in loans as of mid-August, compared with member quotas of $383 billion and additional pledged or committed resources of about $600 billion, IMF data show.
The Australian dollar rose 0.9 percent against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes, and the kiwi gained 1 percent. Australia’s benchmark 10-year bond yield added eight basis points to 3.93 percent, ending four days of declines.
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
