Aussie Near 2-Month High on Bets RBA to Avoid Rate Cut
Australia’s dollar traded 0.4 percent from an almost two-month high on bets the nation’s central bank will leave interest rates on hold tomorrow, preserving the yield advantage of the nation’s assets.
The New Zealand dollar maintained its biggest gain in three weeks versus the greenback as Asian stocks extended a global rally. Demand for the Australian currency was limited after a private report showed the nation’s manufacturing contracted in June for a fourth consecutive month. Data today will probably show manufacturing growth in the U.S. slowed.
“It looks like most economists are expecting no cut, and the market is expecting a very small chance of a cut,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “The Aussie is probably going to be well supported around these levels given that outlook.”
Australia’s dollar traded at $1.0227 at 4:08 p.m. in Sydney from $1.0238 last week in New York, after touching $1.0270, the strongest since May 4. The so-called Aussie weakened 0.4 percent to 81.36 yen. New Zealand’s currency traded at 80.11 U.S. cents, after gaining 1.7 percent to 80.13 cents on June 29, the sharpest advance since June 6. The kiwi slid 0.3 percent to 63.73 yen.
The MSCI Asia Pacific Index (MXAP) of shares added 0.3 percent today. The Standard & Poor’s 500 Index rose 2.5 percent on June 29, after Stoxx Europe 600 Index climbed 2.7 percent following the decision by European leaders to ease terms on loans to Spanish banks during a two-day summit last week.
The Reserve Bank of Australia will keep the overnight cash- rate target at 3.5 percent at tomorrow’s policy meeting, according to all 28 economists in a Bloomberg News survey. Swaps data compiled by Bloomberg show traders see a better than 70 percent chance rates will be unchanged. That’s up from a probability of about 40 percent a week ago.
Australia’s 10-year government bond yield surged 15 basis points, or 0.15 percentage point, to 3.19 percent. The rate earlier touched 3.25 percent, the most since May 17. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, added six basis points to 2.8 percent.
China’s Purchasing Managers’ Index fell to 50.2 in June from 50.4 in May, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday. The HSBC Holdings Plc and Markit Economics reported a June final reading of 48.2 for their purchasing managers’ index today, compared with 48.4 in May.
Australia’s manufacturing contracted last month as concern about the currency’s strength and a new pollution tax overshadowed new orders, according to a survey by the Australian Industry Group and PricewaterhouseCoopers released today.
In the U.S., the Institute for Supply Management Inc. will probably report that its factory index fell to 52 in June, from 53.5 the prior month, a Bloomberg poll showed before the data are released today. A reading greater than 50 signals expansion.
“The positive surprise of a European Summit actually deciding anything, let alone something that counts, was reflected in the surge in risk appetite and concomitant market reaction,” strategists at National Australia Bank Ltd. (NAB) wrote in a note to clients today. “This has settled and may hold today, as markets absorb the details and turn to the global economic realities.”
New Zealand’s dollar may rise to the highest in more than two months as its short-term momentum has a “bullish” bias, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co., wrote in a research note yesterday.
The so-called kiwi is facing an ‘important’’ test at the level of 80.60 U.S. cents to 80.90, which sits on a downtrend line from the Feb. 29 high, the analyst wrote. Rising above that may take the currency toward April highs, O’Connor wrote.
The South Pacific nation’s currency reached 83.20 on April 13, the highest since March 2.
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