Australia’s dollar rose to a more than two-month high on prospects that further monetary easing by the U.S. central bank will debase the greenback.
Australia’s government bonds slumped and the nation’s currency touched the strongest level in eight months versus the yen as gains in global equities boosted demand for riskier assets. New Zealand’s dollar traded at a three-year high against the Japanese currency. The advance in the so-called Aussie was limited after a private report showed consumer confidence slumped the most in nine months.
“Market sentiment is pretty buoyant,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “Provisions of liquidity from foreign central banks have been a key determinant of the Australian dollar’s performance.”
Australia’s dollar touched $1.0541, the highest since Sept. 17, before trading at $1.0524 as of 4:01 p.m. in Sydney, little changed from yesterday’s close. The Aussie rose 0.1 percent to 86.94 yen after reaching 87.04, the strongest since March 28.
New Zealand’s dollar, known as the kiwi, was little changed at 83.92 U.S. cents. It touched 83.98 U.S. cents, matching yesterday’s high, the strongest since March 2. New Zealand’s currency added 0.1 percent to 69.33 yen, after reaching 69.39, the strongest since October 2009.
Australian government bonds fell, with the 10-year yield rising eight basis points, or 0.08 percentage point, to 3.21 percent. The MSCI Asia Pacific Index (MXAP) of stocks gained 0.5 percent, following a 0.6 percent advance in MSCI’s World Index (MXWO) yesterday.
The Federal Open Market Committee will announce $45 billion in monthly Treasury buying that will push its balance sheet almost to $4 trillion, according to the median estimate in a Bloomberg News survey of economists. It concludes a two-day policy meeting today, the last of the year.
Reserve Bank of Australia Governor Glenn Stevens said the expansion of balance sheets by foreign central banks since 2008 has caused currencies of export-driven economies including Australia to surge, according to the text of a speech to be delivered in Bangkok today. He did not address Australia’s economic outlook or domestic interest rate policy in his prepared remarks.
The Australian dollar has risen 0.7 percent so far in 2012 according to Bloomberg Correlation-Weighted Index. The kiwi dollar’s 6.1 percent advance over the same period was the best performance among the 10 developed-market currencies tracked by the gauges.
Demand for the Aussie was limited after consumer confidence slumped. The sentiment index slipped 4.1 percent to 100 in December from last month, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken Dec. 3-9 and released in Sydney today showed. Readings above 100 indicate optimists outnumber pessimists.
National Australia Bank Ltd. said yesterday its business confidence index dropped to the lowest since April 2009.
The RBA reduced its benchmark interest rate on Dec. 3 by 25 basis points to 3 percent. Interest-rate swaps data compiled by Bloomberg show traders see a 52 percent chance the central bank will cut borrowing costs to 2.75 percent when it next meets Feb. 5.
“Until we see a turnaround in both business and consumer confidence, the RBA will retain an easing bias,” Spiros Papadopoulos, the Melbourne-based senior economist at National Australia Bank Ltd., wrote in a note to clients today. “We expect a further cut in the first half of 2013, but if the weakness in confidence and conditions continues, the RBA will have to cut more than once next year.”
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