Aussie Near 2-Month High on Stock Gains, U.S. Budget Optimism

Australia’s dollar traded near a two-month high after equities rebounded globally on speculation the U.S. will avoid the so-called fiscal cliff, boosting demand for higher-yielding assets.

The New Zealand dollar remained higher versus the greenback after U.S. House Speaker John Boehner said he’s optimistic officials can “avert this crisis sooner rather than later.” Demand for the so-called Aussie was limited after a report showed Australia’s business investment grew at a slower pace in the third quarter, supporting expectations that the country’s central bank will cut interest rates next week.

“Everybody expects some resolution to the fiscal cliff,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The better the solution, the smoother it is, the easier it will be for the economies to grow, which is good for Australia’s dollar.”

The Australian dollar was little changed at $1.0472 as of 4:52 p.m. in Sydney from yesterday, when it gained 0.3 percent. It touched $1.0490 on Nov. 27, the highest since Sept. 21. The currency was poised for a 0.9 percent gain this month.

New Zealand’s currency added 0.2 percent to 82.52 U.S. cents from 82.37 yesterday, when it advanced 0.4 percent. It has risen 0.3 percent since the end of last month.

Fiscal Cliff

U.S. President Barack Obama assured company executives yesterday that he was ready to cut spending as he dispatched Treasury Secretary Timothy F. Geithner to meet with congressional leaders today amid negotiations to lower the nation’s budget deficit. If lawmakers fail to reach agreement, more than $600 billion in automatic spending cuts and tax increases are set to begin Jan. 1.

“Cautious optimism from the key players in the negotiations, first House Speaker Boehner then President Obama, restored confidence to the jittery market,” Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney, wrote in a note to clients today. The South Pacific currencies “bounced sharply as equities rose steadily.”

The MSCI Asia Pacific Index of stocks climbed 0.9 percent, following a 0.4 percent advance in the MSCI World Index (MXWO) yesterday.

Capital Expenditure

Demand for Australia’s currency was limited after the nation’s business investment slowed. Private capital expenditures rose 2.8 percent in the third quarter, compared with 3.4 percent in the previous three-month period, the Australian Bureau of Statistics said today.

Fifteen out of 26 economists surveyed by Bloomberg News expect the Reserve Bank of Australia to cut rates by a quarter- percentage point to 3 percent on Dec. 4, while the remaining 11 forecast no change.

“We think they should be cutting rates because the Australian economy is slowing,” said St. George’s Kunnen, who expects an interest-rate reduction in February. “It’s a 50-50 call for next week. It shouldn’t lead to a large selloff or a substantial gain in the Australian dollar.”

Australian government bonds were little changed, with 10- year debt yielding 3.22 percent.

Five-year credit-default swaps for Australian debt, a gauge of bond-risk perceptions, cost 1 basis point more than that for the U.S. yesterday, the smallest gap since July 2011.

In New Zealand, a private survey showed business expectations for inflation fell to a 13-year low in November, adding to the case for benign price pressure that may prolong a period of record-low interest rates. Annual inflation will be 2.24 percent in a year, down from a 2.36 percent outlook in October and the lowest since October 1999, ANZ Bank New Zealand Ltd. said in a report today.

The nation’s two-year overnight-index swap rate, an indication of what traders expect the Reserve Bank of New Zealand’s key interest rate will average during the period, was little changed at 2.42 percent.

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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