The Australian and New Zealand dollars gained against most of their major counterparts as Asian stocks pared earlier losses, supporting demand for higher-yielding currencies. The so-called Aussie stayed near a record high versus the euro amid prospects the European Central Bank will lower borrowing costs further, boosting the yield advantage of the South Pacific nation’s assets.
“The domestic economy has been doing fairly well in Australia, and that is likely to lend some support to the Aussie,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “The direction in the commodity currencies, however, may rather hinge on the global market sentiment.”
The Australian currency added 0.3 percent to $1.0227 as of 4:44 p.m. in Sydney from the close in New York yesterday, following a 0.9 percent drop over the previous three trading sessions. It gained 0.3 percent to 81.13 yen, after yesterday touching 80.66, the lowest level since June 29. The New Zealand dollar rose 0.2 percent to 79.57 U.S. cents and fetched 63.13 yen from 63.06.
Australian 10-year bond yields were little changed at 2.99 percent. The MSCI Asia Pacific Index of shares gained 0.1 percent from yesterday, after earlier falling as much as 0.5 percent.
An index of Australian consumer sentiment advanced 3.7 percent in July to 99.1, the highest level since February, according to a report today from Westpac Banking Corp. (WBC) and the Melbourne Institute. Data released earlier this month showed retail sales increased in May and home-building approvals climbed by a record.
The number of loans in Australia granted to build or buy houses and apartments declined 1.2 percent in May from the previous month, when they rose a revised 0.5 percent, a separate government report indicated today. The median estimate in a Bloomberg News survey of economists was for a 0.8 percent increase in approvals.
ECB President Mario Draghi signaled this week that euro- area policy makers may be open to another interest-rate cut if the economic outlook warrants it. They cut the key rate to an all-time low of 0.75 percent on July 5.
“The widening yield gap between Australia and Europe is encouraging the Aussie-euro carry trades,” said Kawabata.
In Australia, the central bank kept the overnight cash-rate target at 3.5 percent last week, the highest among major developed nations.
The Australian dollar reached a record high of 83.42 euro cents yesterday before closing at 83.20. It was at 83.39 today.
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