Kiwi Dollar Touches 5-Week High Versus Aussie Counterpart
The New Zealand dollar touched the strongest in five weeks against its Australian counterpart after house prices in the smaller country rose last month at the fastest annual pace in five years and card spending increased.
Australia’s dollar declined against all 16 major peers after business confidence dropped to the lowest since 2009. The South Pacific nations’ currencies were supported against the U.S. dollar amid bets the Federal Reserve will add to monetary stimulus which tends to debase the greenback at its policy meeting starting today.
“‘The recent data out of New Zealand has supported the case for the Reserve Bank to maintain its neutral bias and not cut interest rates,’’ said Mike Jones, a currency strategist at Bank of New Zealand in Wellington ‘‘That’s helping the kiwi dollar outperform.’’
New Zealand’s currency rose 0.1 percent to 83.54 U.S. cents as of 4:40 p.m. in Sydney, after earlier touching 83.55, the highest since Sept. 28. It was little changed at 68.77 yen. Australia’s dollar fell to NZ$1.2535, the lowest since Nov. 5, before trading at NZ$1.2548, 0.1 percent below yesterday’s close. The Aussie bought $1.0482 from $1.0488 yesterday. On Dec. 6, it reached $1.0516, the highest since Sept. 21. It slid 0.1 percent to 86.29 yen.
Australian government bonds rose, with the 10-year yields dropping two basis points, or 0.02 percentage point, to 3.13 percent.
The Real Estate Institute of New Zealand said house prices climbed 7.3 percent in November from a year earlier, the fastest annual pace since November 2007. The value of transactions on electronic cards rose 0.5 percent from October, when it gained 0.4 percent, the statistics bureau said today in Wellington. Core spending, which excludes sales at fuel outlets, car dealers and parts stores, increased 1 percent, the biggest advance in seven months.
New Zealand’s two-year swap rate, an indication of what traders expect the central bank’s key interest rate will average during the period, was little changed at 2.713 percent.
The kiwi dollar has jumped 5.8 percent this year, the best performer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Index. The Australian dollar has gained 0.5 percent over the same period.
The U.S. Federal Open Market Committee meets for the last time this year today and tomorrow. It will consider whether to expand purchases of assets after its so-called Operation Twist program of swapping $45 billion a month in short-term Treasuries for long-term debt expires this month.
‘‘We’re expecting the Fed to announce another asset- purchase scheme this week,” said Bank of New Zealand’s Jones. “That’s likely to maintain downward pressure on the U.S. dollar and allow the kiwi and the Aussie to keep rising.”
The Australian currency weakened after a private report showed business confidence plunged last month. National Australia Bank Ltd. said its confidence index dropped to minus 9 from minus 1 in October, the lowest since April 2009, citing a survey of more than 600 companies taken Nov. 19-27. The business conditions gauge, a measure of hiring, sales and profits, held at minus 5, the weakest level since May 2009.
The Reserve Bank of Australia reduced its benchmark interest rates on Dec. 3 by 25 basis points to 3 percent. Interest-rate swaps data compiled by Bloomberg show traders see a 54 percent chance the central bank will cut again to 2.75 percent when it next meets Feb. 5. That compares with 50 percent chance indicated a week ago.
“While we pencil in one final cut in mid-2013, today’s poor report does, at the margin, increase the chance that the RBA may have to act sooner rather than later,” Alvin Pontoh, a strategist at TD Securities Inc. in Singapore, wrote in a research note today. “The fact that business confidence continues to deteriorate despite lower interest rates does suggest that business are slow to respond to easier monetary policy.”
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