BLBG:Australian, N.Z. Dollars Rise as Stocks Rally, U.S. Economic Data Improve
The Australian and New Zealand dollars advanced for a second day as Asian equities extended a global rally, supporting demand for higher-yielding assets.
The South Pacific nations’ currencies rebounded from two- week lows after reports added to signs the U.S. economy is gaining momentum even as Europe struggles to contain its debt crisis. Advances in the so-called Aussie were limited before the Reserve Bank of Australia releases minutes next week of its Dec. 6 meeting when the central bank implemented a second-straight interest-rate cut.
“The market has already factored in a fairly negative outcome from Europe and there’s some scope for sentiment to improve,” said Greg Gibbs, a foreign-exchange strategist in Sydney at Royal Bank of Scotland Group Plc. The Australian dollar is likely to “firm up,” he said.
The Australian dollar advanced 0.5 percent to 99.73 U.S. cents at 2:32 p.m. in Sydney, trimming its five-day decline to 2.4 percent. It sank to as low as 98.62 cents yesterday, the least since Nov. 28. It gained 0.5 percent to 77.67 yen today.
New Zealand’s currency rose 0.8 percent to 75.94 U.S. cents, paring its weekly drop to 2.1 percent. Before rallying yesterday, the kiwi fell to as low as 74.62, its weakest level since Nov. 28. It climbed 0.8 percent to 59.14 yen.
The MSCI Asia Pacific (MXAP) Index of shares added 0.6 percent. The Standard & Poor’s 500 Index of U.S. stocks gained yesterday for the first time this week.
U.S. Economy
The number of U.S. applications for unemployment payments dropped by 19,000 to 366,000 in the week ended Dec. 10, less than the lowest forecast of economists surveyed by Bloomberg News and the least since May 2008, according to Labor Department figures issued yesterday in Washington. Other reports showed manufacturing accelerated this month after pausing in November.
“The U.S. economy has certainly been pretty stable for several months,” said RBS’s Gibbs. Recent demand for the U.S. dollar may have been “excessive,” he said.
The Aussie is still set for its biggest weekly decline in almost a month against the yen, having dropped 2.1 percent since Dec. 9. The RBA is scheduled to release on Dec. 20 the minutes of its most recent policy meeting, when it reduced the overnight cash rate target to 4.25 percent from 4.5 percent, the second reduction in two months.
“Until the RBA surprises and doesn’t deliver on what the market currently has priced in, you would expect the Australian dollar to have a grinding selloff,” said Gavin Stacey, chief interest-rate strategist at Barclays Capital in Sydney.
A Credit Suisse Group AG index based on swaps shows traders are betting that Australia’s central bank will cut rates by 135 basis points over the next 12 months. That compares with wagers for 112 basis points of easing indicated on Dec. 7, the day after the RBA’s last policy meeting.
The Australian dollar has fallen 2.5 percent against its U.S. counterpart since the end of last year, while the kiwi has dropped 2.7 percent.
To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
