BLBG:N.Z. Dollar Advances Versus Aussie on Monetary Policy Outlooks
New Zealand’s dollar advanced against the Australian currency on prospects the bigger nation’s central bank will cut interest rates next month.
The so-called kiwi climbed against 15 of its 16 major peers after the Reserve Bank of New Zealand left interest rates unchanged, citing benign inflation. The Australian currency, nicknamed the Aussie, remained higher against the U.S. dollar after a gain yesterday as Asian stocks extended a global rally, boosting demand for riskier assets.
“Compared to the Aussie, we’re seeing a bit of resilience” in the kiwi, said Lee Sue Ann, a Treasury economist at United Overseas Bank Ltd. (UOB) in Singapore. Unlike the Reserve Bank of Australia, which is “looking at rate cuts, in New Zealand we’re looking for a rate hold.”
The New Zealand currency gained 0.2 percent to NZ$1.2706 per Australian dollar as of 2:48 p.m. in Sydney. It climbed 0.3 percent to 81.59 U.S. cents. The Aussie was at $1.0367 after having risen 0.4 percent to $1.0353. Two-year swap rates in the smaller nation slid as much as 9.7 basis points to 2.7584 percent, the lowest since Feb. 2.
The MSCI Asia Pacific Index of shares advanced 0.3 percent after the MSCI All-Country World Index (MXWD) rose 0.9 percent yesterday. The Chicago Board Options Exchange Volatility Index (VIX), known as the VIX, dropped 7.1 percent to 16.82, its lowest close since April 5, indicating traders expect the U.S. stock market to be less volatile.
“Global sentiment has been strong for the past two days, and that’s helped high-beta currencies like the Aussie and kiwi rise,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender.
RBNZ Decision
The RBNZ left its official cash rate at 2.5 percent at a policy meeting today.
“The New Zealand dollar has stayed elevated despite recent falls in commodity prices,” Governor Alan Bollard said in a statement. “Should the exchange rate remain strong without anything else changing, the bank would need to reassess the outlook for monetary policy settings.”
New Zealand’s dollar has gained 2.7 percent this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Australia’s currency has lost 1 percent.
“Today’s comments suggest that the RBNZ may now be comfortable with a strong New Zealand dollar, should N.Z. commodity prices recover and domestic growth pick up,” Hamish Pepper and Olivier Desbarres, currency strategists in Singapore at Barclays Plc, wrote in a research note.
Traders are betting the Reserve Bank of Australia will definitely cut its benchmark rate from 4.25 percent at its next meeting on May 1, according to a Credit Suisse Group AG gauge based on swaps.
An index of Australian leading economic indicators was unchanged in February after gaining 1 percent the prior month, the New York-based Conference Board said today.
To contact the reporters 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
