Australian, N.Z. Dollars Climb as Economic Data Increase Appetite for Risk

The Australian and New Zealand dollars climbed, reversing earlier losses, after data showing unexpected increases in European manufacturing and services boosted demand for higher-yielding assets.

Australia’s currency, known as the Aussie, rose to the highest level in almost 10 weeks against its U.S. counterpart as commodities and global stocks advanced. Both South Pacific currencies earlier declined against the greenback and yen as confidence gauges in the two countries fell before regulators release the results of stress tests tomorrow on European banks.

“A lot of people are getting out of the flight to quality,” said Frank Pavilonis, senior market strategist in Chicago at Lind-Waldock, the retail arm of futures broker MF Global Holdings Ltd. “The risk trade is on, the Aussie is up.”

Australia’s currency rose 1.8 percent to 77.77 yen at 12:34 p.m. in New York, from 76.43 yesterday. It appreciated 1.7 percent to 89.32 U.S. cents, from 87.81 cents yesterday, after earlier reaching 89.37, the highest level since May 14.

New Zealand’s dollar strengthened 1.7 percent to 63.08 yen, from 62.02, and fetched 72.48 U.S. cents, from 71.24 cents.

A composite index based on a survey of euro-area purchasing managers in services and manufacturing increased to 56.7 from 56 in June, London-based Markit Economics said today. Economists in a Bloomberg survey had projected a drop to 55.5. A gauge of German manufacturing also unexpectedly rose this month.

The MSCI World Index of stocks rose 2 percent and the Reuters/Jefferies CRB Index of raw materials added 1.7 percent.

Confidence Gauges

Consumer confidence in New Zealand fell to 115.6 this month from 122 in June, according to an index compiled by ANZ National Bank Ltd. and Roy Morgan Research. The gauge was at its lowest in almost a year, the bank said in an e-mailed statement.

Australian business confidence dropped in the second quarter to 3 points from 17 points in the previous three months, according to a survey by National Australia Bank Ltd.

“The next big event for currency markets is tomorrow’s European bank stress tests,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “That could potentially be very bad for the euro. If it’s bad for the euro, it’ll be bad for the Aussie and kiwi as well.”

European Union regulators are examining the strength of 91 banks to determine if they can survive potential losses from both a recession and a decline in the value of government debt.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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