The Australian and New Zealand dollars advanced for a second day as signs of strong economic data in the U.S. and Australia revived demand for higher- yielding assets.
Australian bonds fell for the first time in four days as a report showed the nation unexpectedly generated a trade surplus in April with exports gaining 11 percent. The South Pacific currencies were bolstered after Asian equities jumped the most in six months as prospects a U.S. recovery is accelerating outweighed concern about Europe’s debt struggles. Reserve Bank of New Zealand Governor Alan Bollard is forecast to increase the official cash rate on June 10, a Bloomberg News survey shows.
“So far the crisis in Europe hasn’t had a material impact on either the Australian or New Zealand economies,” said Thomas Averill, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “As equity markets stabilize you will see a broad-based recovery in the Aussie and kiwi.”
Australia’s currency rose 0.9 percent to 84.96 U.S. cents as of 4:14 p.m. in Sydney from 84.21 cents yesterday in New York. It advanced 1.2 percent to 78.50 yen.
New Zealand’s dollar advanced 0.8 percent to 68.72 U.S. cents and touched 68.84 cents, the most since May 19. The so- called kiwi gained 1.1 percent to 63.48 yen.
The MSCI Asia Pacific Index climbed 2.8 percent, the most since November 2009.
A positive weekly close in equity markets along with a strong U.S. payrolls number tomorrow might take the Australian dollar up to 87 U.S. cents next week with New Zealand’s dollar gaining toward 70 cents, said Averill.
Figures from the U.S. Labor Department will show employers added jobs for a fifth month in May, according to a survey of economists before the report tomorrow.
Benchmark interest rates are 4.5 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.
Australia’s trade balance swung to a surplus in April as exports of iron ore jumped by a quarter and coal shipments surged 40 percent.
The trade surplus was A$134 million ($113 million), compared with a revised deficit of A$2.04 billion in March, the Bureau of Statistics said today. The median estimate in a Bloomberg News survey of 19 economists was for a shortfall of A$800 million.
“We expect to see some significant surpluses over the course of the next 12 months, which presents the Reserve Bank of Australia with its significant monetary policy challenge,” Roland Randall, an analyst at TD Securities Ltd. in Singapore, wrote in a note to clients.
N.Z. Dollar Gains
Kokusai Asset Management Co. expects Chinese demand for New Zealand’s milk and wool to spur economic growth, leading Bollard to raise interest rates from a record low.
“New Zealand will benefit from the Chinese recovery,” said Masataka Horii, who helps oversee the equivalent of $54.5 billion including Asia’s biggest bond fund at Kokusai in Tokyo. “Their economy is getting better. Overseas bondholders will be able to profit from currency appreciation.”
Interest-rate swaps indicate an 80 percent chance Bollard will lift the official cash rate at the Reserve Bank’s next meeting on June 10, according to a Credit Suisse Group AG index based on swaps. The kiwi dollar will rise to 72 cents by Dec. 31 based on the median estimate of strategists surveyed by Bloomberg.
Australian bond futures fell, with the 10-year contract for June delivery declining to 94.565 on the Sydney Futures Exchange from 94.675 yesterday. The implied yield on the futures stood at 5.435 percent. The implied yield on three-year futures was 4.85 percent.
The yield on Australia’s 10-year note rose 11 basis points, or 0.11 percentage point, to 5.44 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.41 percent from 4.40 yesterday.