Aussie, Kiwi Hold Gains Versus Yen as Commodities, Stock Rise

Australia’s dollar traded 0.3 percent from a 10-month high against the yen as gains in commodities prices boosted earnings prospects for the nation’s export industries.

New Zealand’s dollar traded 0.1 percent from a seven-month peak against Japan’s currency as Asian stocks extended a global rally, supporting riskier assets. Both South Pacific currencies fell against their U.S. counterpart after the Federal Reserve raised its assessment of the American economy, reducing prospects for monetary stimulus that would debase the greenback.

“You are seeing a little bit of a rebound in commodities prices and that’s one of the key reasons why Aussie will be stronger against the yen,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s biggest interdealer broker. “If global data flow continues to be on the positive side and commodities prices continue to rise, we might see a rate hike sooner rather than later in New Zealand, and that discussion alone will support the kiwi against yen.”

Australia’s dollar rose 0.2 percent to 87.71 yen as of 4:02 p.m. in Sydney from yesterday, when it gained 1.2 percent. It reached 88.01 yen on March 2, the most since May 11. The Aussie slid 0.1 percent to $1.0544.

New Zealand’s currency bought 68.26 yen from 68.28 yesterday, when it advanced 1.5 percent. The so-called kiwi reached 68.35 on Feb. 27, the most since Aug. 1. It lost 0.3 percent to 82.06 U.S. cents.

The MSCI Asia Pacific Index (MXAP) of stocks rose 1.1 percent after the MSCI World Index gained 1.5 percent yesterday. The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials rose 0.7 percent yesterday.

Rate Prospects

Reserve Bank of New Zealand Governor Alan Bollard kept the key cash rate at a record low 2.5 percent on March 8, in line with expectations of economists surveyed by Bloomberg.

A Credit Suisse Group AG index based on swaps indicates the RBNZ will raise interest rates by 16 basis points, or 0.16 percentage point, over the next 12 months, compared to 6 basis points of reduction indicated on Feb. 3. Swaps (CS1YRBA) traders expect 53 basis points of cuts by the Reserve Bank of Australia over the same period.

Demand for the Aussie was limited after a Westpac Banking Corp. (WBC) and Melbourne Institute survey showed that Australian consumer confidence fell the most in three months.

The sentiment index for March dropped to 96.1, the lowest level since December, the poll taken March 5-9 of 1,200 consumers showed today in Sydney.

‘Increasingly Vulnerable’

The Australian dollar “looks increasingly vulnerable to further short-term slippage,” Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB, wrote in a research note today. “A spate of weaker data over recent weeks has helped to undermine the currency.”

A narrowing in the yield advantage of Australian debt over U.S. Treasuries may explain some of the recent weakness in the Aussie dollar, according to Kotecha.

The extra yield investors demand to hold 10-year Australian government bonds over similar-maturity Treasuries was at 191 basis points, after reaching 180 yesterday, the narrowest gap since Feb. 3, according to data compiled by Bloomberg.

The Federal Open Market Committee, which met yesterday in Washington, kept the U.S. benchmark interest rate target unchanged at zero to 0.25 percent, where it’s been since December 2008. “The unemployment rate has declined notably in recent months, but remains elevated,” the central bank said in a statement.

“You’re seeing better U.S. data relative to weak data elsewhere,” said Callum Henderson, global head of foreign- exchange research in Singapore at Standard Chartered Plc. “That’s limiting the upsides in Aussie and kiwi and weighing on them to some extent.”

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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