Aussie Trades Near Post-Float High as Growth Signs Boost Demand for Yields
The Australian dollar reached the highest since the currency was freely floated in 1983 as U.S. data spurred speculation global growth is gathering momentum, boosting demand for currencies with higher-yielding assets.
The Aussie traded above parity with the U.S. dollar for an eighth-straight day after copper prices climbed to record levels, boosting export prospects for the resource-rich nation. New Zealand’s dollar, known as the kiwi, was close to a five- week high before data next week that may show U.S. manufacturing grew at the fastest pace in seven months.
“Data we’ve got out of the U.S. has improved,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., the nation’s second-biggest lender. “I think we finish 2010 on an upbeat note from a global economic point of view. That’s supportive of commodity prices and currencies like the Aussie and kiwi.”
Australia’s currency was at $1.0239 at 11:24 a.m. in New York, the highest since July 1982, compared with $1.0172 yesterday. The nation stopped pegging its currency to a trade- weighted basket of currencies in December 1983.
The Aussie had a 14 percent gain this year against its U.S. counterpart, the second-best performer after the yen. Today it bought 83.02 yen from 82.93 yen.
New Zealand’s dollar traded at 77.86 U.S. cents from 77.06 cents yesterday. It earlier touched 78.14 cents, the highest since Nov. 22, and fetched 63.16 yen from 62.81 yen.
The kiwi had a 7.9 percent gain against the dollar.
Westpac’s Rennie forecast the Aussie to stay above the parity level for at least the first half of 2011 before markets start to price in changes in U.S. monetary policy.
The U.S. currency weakened after economic reports yesterday showed business expansion, fewer jobless claims and more pending home sales. The data signaled the world’s largest economy is accelerating into the new year, encouraging demand for currencies in nations with higher-yielding assets.
The London Metal Exchange Index of six metals including copper and aluminum gained 0.7 percent yesterday to the highest level since April 2008. Copper futures for March delivery rose to an all-time high on the Comex in New York.
Australia’s dollar has gained 11.7 percent in 2010 in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar declined 3.5 percent, extending a 10 percent slide in 2009, while New Zealand’s dollar was up 4.8 percent.
Benchmark interest rates are 4.75 percent in Australia and 3 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
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