The Australian and New Zealand dollars gained as prospects for accelerating domestic growth boosted demand for the South Pacific nations’ assets.
Both currencies advanced as the International Monetary Fund yesterday raised forecasts for expansion in the two nations. New Zealand Finance Minister Bill English said today the economy is recovering “slightly more strongly” than a December Treasury forecast. Australia’s statistics bureau will release inflation data on April 28 after consumer prices gained in the final quarter of 2009 at a faster pace than analysts estimated.
“The market is beginning to price in another rate hike from the Reserve Bank of Australia and will be looking toward consumer prices next week as a key indicator of whether that’s justified,” said Tim Waterer, a foreign exchange dealer with CMC Markets in Sydney. “There are people out there looking for opportunities to buy the Aussie dollar.”
Australia’s currency rose to 92.81 U.S. cents as of 4:55 p.m. in Sydney from 92.68 cents in New York yesterday. It fetched 86.29 yen from 86.37 yen. New Zealand’s dollar rose 0.3 percent to 71.19 U.S. cents and bought 66.18 yen from 66.15 yen.
Australia’s dollar traded within two U.S. cents of a five- month high against the greenback before a speech tomorrow on economic conditions and prospects by central bank Governor Glenn Stevens. The currency climbed to 93.89 cents on April 12, the highest since Nov. 16.
IMF Forecast, Rates
Australia’s gross domestic product will expand 3 percent this year and 3.5 percent in 2011, the IMF said in its global economic outlook published yesterday. The nation’s central bank will continue to be one of the leaders in raising borrowing costs worldwide, the IMF said.
“All the fundamental stars remain in alignment, suggesting that the Australian dollar should continue appreciating,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “The news for Australia will continue to be good.”
New Zealand’s currency was bolstered on prospects stronger growth will prompt its central bank to signal that interest rates will rise from a record low. Policy makers meet April 29 and are forecast by all 14 economists in a Bloomberg News survey to keep the benchmark rate unchanged at 2.5 percent.
The IMF yesterday predicted growth would be 2.9 percent this year and 3.2 percent in 2011, compared to a December forecast from the nation’s Treasury for a 2.1-percent expansion this year.
Benchmark interest rates are 4.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Both currencies earlier weakened against the yen on concern Greece’s struggle to fund its budget shortfall will damp demand for higher-yielding assets. The extra yield investors demand to hold Greek 10-year bonds instead of similar-maturity German bunds climbed to the highest level since at least March 1998 yesterday.
“Contagion from Greece remains perhaps the biggest threat to global market stability and risk appetite,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “This could yet bring back commodity currencies a peg or two in the near term.”
Greece’s deficit of 12.9 percent of gross domestic product is four times the EU limit. Budget shortfalls across the euro region have surged as governments bailed out banks and spent billions on economic stimulus.
Australian government bonds rose. The yield on the benchmark 10-year note fell five basis points to 5.81 percent, according to data compiled by Bloomberg. The 4.5 percent security due in April 2020 advanced 0.34, or A$3.40 per A$1,000 face amount, to 90.22.