Aussie, Kiwi Gain as Stocks Rally on IMF Growth Outlook

The Australian dollar remained higher against most of its major peers as Asian stocks extended a global rally after the International Monetary Fund raised its economic growth outlook.

The New Zealand dollar rose for a second day versus the yen as a drop in currency-market volatility supported demand for higher-yielding assets. Gains in the so-called kiwi were limited after Auckland-based Fonterra Cooperative Group Ltd. said whole- milk powder prices fell to the lowest since August 2009, and before data forecast to show inflation stayed within the Reserve Bank of New Zealand’s target of 1 percent to 3 percent.

“It’s a pretty fair bet we’d run with the positive sentiment for now,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. “We’ve seen a pretty big move on the likes of Aussie and kiwi. I think they can test a little bit higher on the day.”

Australia’s currency traded at $1.0398 at 4:14 p.m. in Sydney from $1.0390 yesterday. It gained 0.7 percent to 84.59 yen from yesterday, when it rallied 0.9 percent to 84.

New Zealand’s currency fetched 82.15 U.S. cents from 82.10. The kiwi strengthened 0.7 percent to 66.83 yen from yesterday, when it rose 0.6 percent to 66.38.

The MSCI Asia Pacific Index (CRY) of stocks rose 1.2 percent, following a 1.6 percent rally in the MSCI World Index yesterday. The Thomson Reuters/Jefferies CRB Index of raw materials climbed 0.4 percent yesterday.

IMF Forecast

The implied volatility of three-month options for Group of Seven currencies was 9.77 percent, little changed from yesterday when it touched 9.66, the lowest since August 2008, according to the JPMorgan G7 Volatility Index. The average over the past decade is 10.6 percent. A drop makes investments in currencies with higher rates more attractive because it shows the risk is lower that market moves will erase profits on such trades.

The IMF’s World Economic Outlook forecast the global economy will expand 3.5 percent this year and 4.1 percent in 2013, an increase from its January projections of 3.3 percent growth in 2012 and 4 percent next year.

Australian Treasurer Wayne Swan said the IMF report confirms the nation’s economic fundamentals are strong. IMF forecasts for Australian growth of 3 percent in 2012 and 3.5 percent in 2013 are consistent with the government’s plan to return to surplus in 2012-2013, Swan said in a statement.

An Australian index of leading economic indicators rose 0.2 percent in February from a month earlier to 284.2, Westpac Banking Corp. (WBC) and the Melbourne Institute said in Sydney today.

Milk Prices

Australia’s government bonds declined, pushing up the yield on the 10-year security seven basis points, or 0.07 percentage point, to 3.87 percent. The rate on the two-year government note also rose seven basis points to 3.27 percent.

Fonterra, the world’s largest dairy exporter, said milk powder for June delivery fell 13.6 percent from the April 3 sale, the largest decline since August 2010, according to a trade-weighted index. The near-term contract declined for the ninth consecutive auction to $2,766 a metric ton, the company said on its GlobalDairyTrade website.

Statistics New Zealand data tomorrow may show that the nation’s consumer price index increased 0.5 percent in the first quarter from the previous three-month period, according to median estimate of economists surveyed by Bloomberg News. Prices probably rose 1.6 percent from a year earlier, the slowest annual pace since September 2010.

The decline in milk prices “is not very helpful for the kiwi,” said Westpac’s Callow. “If you get a very low CPI tomorrow that would be a bit of a double whammy.”

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, added 2 1/2 basis points to 2.95 percent. It touched 2.90 percent on April 16, the lowest since Feb. 16.

To contact the reporters 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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