WSJ:Australian Dollar Up Late, Helped By Fitch Upgrade
Rates At 0515 GMT
Latest Change
AUD/USD 0.9950 +1.12%
AUD/JPY 77.69 +1.68%
6.5% May, 2013 3.2317% +0.0631
4.5% Mar, 2020 3.8595% +0.0690
10-Yr Spread To U.S. +190 bps +1 bps
SFE Dec 3-Year Futures 96.86 -0.07
SFE Dec 10-Year Futures 96.00 -0.085
SYDNEY (Dow Jones)-- The Australian dollar leapt higher for a second-straight day Tuesday, helped in part by an upgrade to the country's long-term foreign currency rating by Fitch.
Further helping perceptions of Australia and its currency, the Paris-based Organization for Economic Cooperation and Development, or OECD, forecast in its global economic outlook that Australia would be the one of the fastest growing economies in the world in 2012. That came just before Fitch upgraded Australia's long-term foreign-currency rating to AAA from AA+, citing low government debt levels and a flexible policy framework.
Even so, the currency faced some stiff selling late in the morning as Australian Treasurer Wayne Swan had to announce spending cuts of A$11.5 billion over the next four years to ensure the government would remain on track to produce a promised surplus by 2012-13. The government has stuck doggedly to its goal of restoring its budget to surplus in 2012-13, despite slashing its growth outlook for the country.
"It shouldn't be a surprise about their lowered outlook but we should be impressed about the new savings. As long as we see a positive number for 2012-13, this is a positive," said Annette Beacher, head of Asia-Pacific research at TD Securities.
At 0515 GMT, the Australian dollar was trading at US$0.9950, up from US$0.9840 late Monday. To be sure, the Australian dollar began November at US$1.0580. Against the yen, the currency changed hands at Y77.69, up from Y76.404 Monday.
While the currency gained, bonds slid on both ends of the curve.
But strategists and economists noted the implications of the mid-year budget mean that the Reserve Bank of Australia, or RBA, could have to lower rates to help stave off the impacts of Europe's growing debt issues. Such a move would see bond prices gain, particularly on the short end of the curve.
"In this (mid-year outlook), the government has shown no willingness to rescue the economy from the weakness...this means the RBA will have to do more, with the crucial question being how fast it will cut rates," said economists at Bank of America-Merrill Lynch.
--By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com
