Aussie, Kiwi Remain Higher as Building Data, Shares Boost Demand

The Australian and New Zealand dollars remained higher after data showing better-than-expected building approvals for both South Pacific countries.

Australia’s currency gained against most of its major counterparts before reports tomorrow that may show improvement in China’s manufacturing, brightening prospects for exports. The so-called Aussie and kiwi were also supported as gains in Asian shares and U.S. stock-index futures boosted demand for higher- yielding assets. Swaps traders reduced bets the Reserve Bank of Australia will cut interest rates at its next meeting.

“The building approvals numbers from Australia and New Zealand were much stronger than expected,” said Khoon Goh, a senior currency strategist in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) The data indicate that the “impact of interest-rate cuts by the RBA over the last year or so is finally starting to have some effect. That’s provided a slight boost to the Aussie.”

The Australian dollar added 0.1 percent to $1.0375 as of 3:51 p.m. in Sydney from the close yesterday. The currency was little changed from $1.0378 at the end of last month. The Aussie rose 0.1 percent to 82.60 yen. New Zealand’s dollar bought 82.10 U.S. cents from 82.08, poised for a 1.1 percent decline in October.

The MSCI Asia Pacific Index of shares rallied 0.9 percent. Futures on the Standard & Poor’s 500 Index (SPX) expiring in December added 0.1 percent. The U.S. Securities and Exchange Commission canceled equity trading for two days through yesterday as the Atlantic storm Sandy caused flooding and blackouts in the Northeast. The New York Stock Exchange said it plans to open today.

Australian Bonds

Australian bonds were little changed, with the 10-year note yielding 3.13 percent. Three-month implied volatility on the Aussie dollar touched 8.32 percent, the lowest since July 26, 2007.

Building approvals in New Zealand increased 7.8 percent in September from August, when they gained a revised 2.8 percent, the statistics office said in Wellington today. Economists in a Bloomberg News survey had projected a 3 percent advance.

In Australia, the number of permits granted to build or renovate houses and apartments gained 7.8 percent last month from August, when they rose a revised 8.8 percent, the Bureau of Statistics said in Sydney today. That exceeded the median forecast for a 1 percent increase in a separate poll.

Overnight index swaps data compiled by Bloomberg indicate about a 60 percent chance of a 0.25 percentage point reduction in the RBA’s key rate, currently held at 3.25 percent, at its Nov. 6 meeting. That compared with 73 percent odds seen a week ago. The probability has fallen since data last week showed a faster-than-expected gain in Australia’s consumer prices.

Rate Prospects

“The paring back of rate-cut expectations is part of the reason why we’re seeing the Aussie firmer,” said ANZ’s Goh, who expects a rate reduction in December.

Figures due tomorrow may show a manufacturing gauge based on a survey of purchasing managers in China, the world’s second- biggest economy, climbed to 50.2 this month from 49.8 in September, according to the median estimate of economists surveyed by Bloomberg.

A similar measure published by HSBC Holdings Plc and Markit Economics may have climbed to 49.1 this month from 47.9 last month, according to a separate poll. That would confirm a preliminary reading released Oct. 24. For both indexes, 50 is the dividing line between contraction and expansion.

China is Australia’s largest trading partner and New Zealand’s second-biggest export market.

“Investors are expecting better figures from China, lending some support to the Aussie,” said Junichi Ishikawa, an analyst at IG Markets Securities Ltd. in Tokyo.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net

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

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