BLBG:New Zealand Dollar Touches Two-Month High on China Monetary Easing Bets
New Zealand’s dollar touched a two- month high against the greenback as a report showed China’s inflation cooled for the fifth straight month in December, increasing speculation the Asian nation will provide more monetary stimulus.
The so-called kiwi also rose to its strongest level since November versus the yen before data that may show U.S. retail sales grew, supporting demand for riskier assets. The Australian dollar was little changed as Spain and Italy prepare to auction debt this week amid concern Europe’s fiscal crisis is worsening.
“I think inflation is still cooling and that’s going to provide scope for Chinese authorities to support markets and the economies more,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “Both the Aussie and kiwi still continue to do quite well against the U.S. dollar.”
New Zealand’s currency gained to 79.81 U.S. cents, the highest since Nov. 9, before trading at 79.55 at 4:09 p.m. in Sydney, 0.2 percent below yesterday’s close in New York. The kiwi earlier rose as much as 0.2 percent to 61.35 yen, also the most since Nov. 9, before changing hands at 61.14.
Australia’s dollar traded at $1.0294 from $1.0310 yesterday and fetched 79.11 yen from 79.24. It was at 80.93 euro cents from 81.14 yesterday, when it reached a record high of 81.20.
China Inflation
China’s consumer prices rose 4.1 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compares with the median estimate of 4 percent in a Bloomberg News survey and 4.2 percent in November.
The People’s Bank of China in November cut the amount of cash that lenders need to set aside as reserves, the first reduction since 2008. China is Australia’s biggest trading partner and New Zealand’s second-largest export market.
Sales at U.S. retailers probably climbed 0.3 percent in December, following a 0.2 percent gain in November, according to the median forecast in a Bloomberg survey of economists before the Commerce Department issues the figure today.
“There’s some signs that the global economy is not falling into a heap,” said Westpac’s Cavanagh. “I think the risks are that you’d see a bit of a squeeze higher in risky assets in the near term.”
The New Zealand dollar has gained 3.2 percent this month, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Australian dollar has advanced 1.5 percent, the second best performer.
Debt Auctions
Demand for the South Pacific currencies was limited before debt sales by Spain and Italy amid concern the nations may struggle to meet their funding needs. Spain will auction as much as 5 billion euros ($6.4 billion) of bonds due 2015 and 2016 today, while Italy is scheduled to sell 12 billion euros of bills. Italy will also sell debt due in 2014 and 2018 in auctions tomorrow.
“Risk appetite will face a real test on European sovereign bond auctions,” Kin Tai Cheung, a research analyst at Credit Agricole CIB in Hong Kong, wrote in a research note today. “Given still fragile sentiment, risk assets could reserve their earlier gains this week on any disappointment.”
Australia’s government bonds advanced, with the yield on 10-year notes falling three basis points, or 0.03 percentage point, to 3.76 percent.
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
