The Australian and New Zealand dollars rose to seven-month highs as investors sold the U.S. currency on concerns the Treasury Department’s record debt sales will undermine the government’s creditworthiness.
Australia’s dollar headed for its 11th advance in 12 weeks as Asian equities are set for a third-straight month of gains. The U.S. dollar fell to a four-week low against the euro and the lowest in nine weeks against the yen after Japanese Finance Minister Kaoru Yosano said the government isn’t planning to intervene in the currency markets.
“General sentiment towards the U.S. dollar is driving everything,” said Ray Attrill, global research director at Forecast Ltd. in Sydney said. “If euro-dollar rises through $1.40, a test of 80 cents for the Aussie looks pretty realistic over the next few days.”
Australia’s currency today rose above 78 U.S. cents for the second day this week touching 78.23 U.S. cents, the most since Oct. 2. It traded at 77.86 cents as of 2:57 p.m. in Sydney, up 3.9 percent from 74.91 cents in New York on May 15. The currency added 2.8 percent to 73.32 yen from 71.32 yen last week.
New Zealand’s dollar rose as much as 1.1 percent today to 61.78 U.S. cents, the highest since Oct. 21, and gained 5 percent this week. It advanced 3.9 percent to 57.88 yen since May 15.
The so-called kiwi may climb to 63 U.S. cents over the next few weeks, Attrill said.
Markets are beginning to anticipate the possibility of the U.S. “eventually” losing its AAA credit rating, said Bill Gross, the co-chief investment officer of Pacific Investment Management Co., in an interview on Bloomberg Television.
Standard & Poor’s yesterday lowered its outlook on Britain to “negative” from “stable” and said the nation faces a one in three chance of a ratings cut as debt approaches 100 percent of gross domestic product.
Global Recovery
The Australian dollar advanced this week as Reserve Bank of Australia Governor Glenn Stevens said May 19 the global recovery may begin “towards the end of the year.”
“To feel comfortable with the Australian dollar above 80 cents you need a combination of the U.S. dollar continuing to weaken and the global economy to strengthen a little more,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney.
The Bank of Japan raised its expectations for the world’s second-largest economy for the first time in almost three years today. The BOJ left its benchmark interest rate unchanged at 0.1 percent and signaled that a record contraction in the first quarter may represent the worst of the recession for Japan.
New Zealand’s currency was bolstered yesterday by the release of government data showing growth in immigration to the nation accelerated to a five-year high in April, indicating consumer spending and demand may improve, helping the economy emerge from its worst recession in more than three decades.
Commodities, Bonds
The South Pacific currencies also advanced as a gauge of commodity prices strengthened 1.6 percent this week and prices for gold, Australia’s third most-valuable export, traded near the highest in two months. China increased imports of copper and primary aluminum to a record in April, customs data showed today, as the nation’s 4 trillion yuan ($586 billion) stimulus program boosts output.
Australia today sold A$700 million ($545.7 million) of securities maturing June 2011 at a weighted average yield of 3.73 percent. The so-called bid-to-cover ratio at the auction was 5.7.
Australian government bonds fell for a fourth day. The yield on 10-year notes added 12 basis points, or 0.12 percentage point, to 5.23 percent, the most since November, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slid 0.95, or A$9.50 per A$1,000 face amount, to 100.13.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.55 percent from 3.54 yesterday.
