BLBG:Australian, New Zealand Dollars Rise as Stocks Climb Before Euro-Area Meet
The Australian and New Zealand dollars rose toward the highest in a week before euro-area officials meet in Brussels amid optimism leaders are working to fast-track a solution to the region’s debt crisis.
The so-called Aussie gained for a fourth day against the yen as Asian stocks extended a global rally, boosting demand for higher-yielding assets. The currency earlier weakened after the government said it will cut spending by A$6.8 billion ($6.7 billion) to deliver a budget surplus, adding pressure on the Reserve Bank of Australia to lower interest rates.
“In the short term, there’s some renewed optimism on Europe and we’re likely to get some positive comments from European leaders,” said Jim Vrondas, a manager at the online foreign-exchange dealer OzForex Ltd. in Sydney. “We’d look at a rally in the Aussie above parity as an opportunity to sell the currency, looking for some further weakness into year-end.”
Australia’s dollar rose 0.6 percent to 99.69 U.S. cents at 4:45 p.m. in Sydney from 99.05 cents in New York yesterday, when it touched 99.76, the most since Nov. 21. The currency gained 0.8 percent to 77.83 yen.
New Zealand’s dollar advanced 0.4 percent to 75.85 U.S. cents, and earlier reached 75.88 cents, the most since Nov. 18. It added 0.6 percent higher at 59.21 yen.
Euro-area officials will begin a two-day meeting in Brussels today. Germany is working with “an ambitious timeline,” Chancellor Angela Merkel’s chief spokesman, Steffen Seibert, said yesterday.
Stocks Rally
The Aussie and kiwi yesterday led advances among major currencies against the U.S. dollar, rising 2 percent as equities rallied worldwide. The MSCI Asia Pacific Index (MXAP) climbed 1.7 percent today, extending a gain from yesterday.
Europe’s leaders are working toward a Dec. 9 summit meeting to regain investor confidence. Finance ministers from the 17- member monetary union are meeting to thrash out details on how the European Financial Stability Facility will boost its muscle by insuring sovereign debt with guarantees.
Demand for the Aussie and kiwi were tempered before Italy tests investor appetite for its debt today auctioning as much as 8 billion euros ($11 billion) in bonds amid concern it may again be forced to pay above the 7 percent threshold that prompted Greece, Portugal and Ireland to seek aid.
“Ultimately you’ve got too much debt,” said Darryl Conroy, an analyst at Suncorp Bank in Brisbane. Markets will “be focused on developments out of Europe.”
The Aussie may weaken to 98.25 cents this week, he said.
Budget Review
Demand for Australia’s currency declined earlier after the Treasury issued its midyear fiscal update.
The reductions in government spending “gives the market a little more confidence that fiscal policy won’t be in the way of the RBA responding to global factors,” said Gavin Stacey, chief interest-rate strategist at Barclays Plc in Sydney. “The Aussie may fall into the low 90s in the near-term with the risk environment likely to get worse before it gets better.”
The surplus forecast for the fiscal year starting July 1, 2012, was cut to A$1.5 billion from a target of A$3.5 billion in the May budget, the Treasury’s midyear review showed. The underlying cash deficit in the fiscal year ending June 30 will be A$37.1 billion, compared with a previous estimate of A$22.6 billion, according to the review.
The government forecast the unemployment rate will be 5.5 percent in June 2012, compared with a 5.2 percent rate in October. Gross domestic product will expand 3.25 percent in the 12 months to June 30 and 3.25 percent in fiscal 2012-13, it said.
Swaps traders are wagering the central bank will lower rates 159 basis points over 12 months, according to a Credit Suisse Group AG index. Australia’s 10-year benchmark bond yield rose nine basis points to 3.97 percent.
Fitch Ratings upgraded Australia’s long-term foreign- currency issuer default rating to AAA from AA+ before the release of the budget review. The nation now holds the top grade at all three main credit assessors for the first time.
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
