The Australian and New Zealand dollars advanced versus most major counterparts on the prospect euro-area governments will agree today on a deal to release a second bailout package for Greece, spurring appetite for higher- yielding assets.
Both currencies also strengthened after China’s central bank said the proportion of cash that lenders must set aside will fall from Feb. 24, adding to speculation the action will boost the country’s economy and demand for exports from Australia and New Zealand. The so-called Aussie and kiwi both climbed to their highest levels against the yen in more than six months as Asian stocks rose.
“The Greek deal should be rubber-stamped by tonight,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “For the next week, the Aussie and the kiwi will remain on their uptrends.”
Australia’s currency rose 0.6 percent to $1.0770 as of 4:56 p.m. in Sydney. It gained 0.6 percent to 85.64 yen and earlier touched 86.36, the strongest level since July 11. New Zealand’s dollar advanced 1 percent to 84.06 U.S. cents. The kiwi strengthened 1 percent to 66.85 yen after earlier reaching 67.32, the highest since Aug. 4.
The Aussie slid 0.4 percent to NZ$1.2811, the biggest one- day drop since Jan. 31.
The MSCI Asia Pacific Index (MXAP) of stocks climbed 0.9 percent.
Finance ministers from the 17 euro-area nations will meet in Brussels today to decide on 130 billion euros ($172 billion) in Greek aid. Prime Minister Lucas Papademos said Greece found all the extra cuts needed to reduce spending by 325 million euros to receive a bailout and avert the region’s first sovereign default.
The People’s Bank of China announced on Feb. 18 that it would lower bank reserve requirements by 50 basis points. China is Australia’s biggest trading partner and New Zealand’s second- largest export destination.
“It’s a stimulus for China, which is good for risk appetite,” Westpac’s Speizer said. “You’d have to be biased upwards rather than downwards this week, at least for risk assets” including the Australian and New Zealand dollars, he said.
The Aussie will probably climb to $1.08 by June 30 and end the year at $1.09, according to a report today by Commonwealth Bank of Australia, the South Pacific nation’s biggest lender by market value. That compares with previous forecasts of 95 U.S. cents on June 30 and $1 at year-end. The New Zealand dollar may advance to 88 U.S. cents by the end of 2012, compared with an earlier estimate of 78 cents, the bank said.
“Over the medium-to-long term, we favor the Australian dollar outperformance,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “I think fundamentals are quite supportive of the Australian dollar.”
Australia’s dollar has appreciated 2.8 percent this year, while New Zealand’s has strengthened 5.7 percent, the two best performances among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
Australia plans to price a new 10-year Treasury Indexed Bond tomorrow, the nation’s funding arm said in an e-mailed statement. The initial issue amount is expected to be A$750 million ($808 million), it said.
Australia’s 10-year (GACGB10) bond yield rose eight basis points, or 0.08 percentage point, to 4.12 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, gained 10 1/2 basis points to 3.065 percent.
New Zealand’s dollar maintained its advance after the Performance of Services index rose to 53.6 last month from a revised 50.9 in December, Bank of New Zealand Ltd. and Business New Zealand said today. A reading above 50 indicates an expansion.
The nation’s producer input prices increased 0.5 percent in the fourth quarter from the three months through September, Statistics New Zealand said today. That’s the smallest advance since the fourth quarter of 2009.
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