BLBG:Australian, N.Z. Dollars Rise Before U.S. Jobs Report
The Australian and New Zealand dollars strengthened against most of their 16 major counterparts before U.S. data tomorrow that may point to an improvement in the labor market.
Demand for the South Pacific currencies was also bolstered as Asian stocks pared declines. The so-called Aussie was within 0.2 percent of a six-month low versus the New Zealand dollar as swaps traders increased bets the Reserve Bank of Australia will cut interest rates next month. Financial markets in both countries will be closed from tomorrow for holidays and will reopen on April 10.
“We are seeing some profit taking ahead of tomorrow’s nonfarm payroll release,” said Jesper Bargmann, regional head of spot trading for major currencies in Singapore at Royal Bank of Scotland Group Plc, referring to the greenback and U.S. employment report. “It is only natural that we see some degree of profit taking before a thin Friday with an important release.”
The Aussie rose 0.4 percent to $1.0313 as of 4:14 p.m. in Sydney. New Zealand’s dollar, nicknamed the kiwi, gained 0.4 percent to 81.84 U.S. cents. The Australian dollar was little changed at NZ$1.2603. It touched NZ$1.2576 yesterday, the weakest since Oct. 6.
The MSCI Asia Pacific Index (MXAP) of shares was down 0.1 percent after earlier falling as much as 1.2 percent.
U.S. Economy
Employment in the U.S. probably rose by 205,000 in March, according to the median estimate of economists before tomorrow’s government report. That would be the fourth straight month with jobs growth above 200,000.
“Good employment figures in the U.S. are likely to bolster confidence in the U.S. recovery,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. That in turn may boost “risk sentiment and spur inflows to the Australian and New Zealand dollars.”
The Aussie had lost 1.4 percent for the two days through yesterday, the worst performer after South Africa’s rand among the 16 major counterparts of the dollar.
Traders see an 90 percent chance that the RBA will lower its benchmark interest rate to 4 percent from 4.25 percent at its next meeting on May 1, according to a Credit Suisse Group AG index based on overnight index swap rates. Yields on Australia’s three-year notes declined as much as six basis points to 3.38 percent, the lowest since Feb. 7.
Waiting for Data
The RBA said on April 3 that its board “thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.” The central bank left the overnight cash-rate target unchanged.
“We have been bearish on the Aussie for a while,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “The RBA was most recently less hawkish than expected, and now markets are basically tilted toward downside in terms of where the RBA may take its policy rate.”
An index for service industries in China, Australia’s biggest trading partner and New Zealand’s second largest, fell to 53.3 last month from 53.9 in February, figures from HSBC Holdings Plc and Markit Economics showed today. Their gauge for the country’s manufacturing sector dropped to 48.3 in March from 49.6 the prior month. Figures below 50 indicate contraction.
‘Curve Will Flatten’
Investors should sell New Zealand’s government bonds maturing in 2015 and buy debt due in 2017, according to Westpac Banking Corp. (WBC), Australia’s second-largest lender.
“The trade is motivated primarily by our view the curve will flatten over the medium and long term,” Imre Speizer, a strategist in Auckland at the bank, wrote in a note today. “Risk aversion fuelled by China’s slowdown should cap longer maturity yields into mid-2012, while the RBNZ’s looming tightening cycle should gradually elevate short maturity yields into year-end,” he wrote, referring to the Reserve Bank of New Zealand.
The yield spread between the securities was 61 basis points today, and Speizer recommended taking profit at 50 basis points. That would be the narrowest gap since August 2011, according to data compiled by Bloomberg.
Swap traders bet the Reserve Bank of New Zealand will raise the benchmark rate by 26 basis points in the next 12 months, according to a Credit Suisse index.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
