Aussie Strengthens Before Rate Announcement; N.Z. Dollar Drops

The Australian dollar rose against a majority of its counterparts amid speculation the central bank will hold interest rates unchanged.

The Aussie gained versus 13 of its 16 most-traded peers before the release of data forecast to show the nation’s trade deficit narrowed. New Zealand’s dollar, nicknamed the kiwi, fell from the highest level versus the greenback since September 2011 as political turmoil in Europe spurred fears the 17-nation euro bloc’s sovereign-debt crisis will worsen, damping risk appetite.

Australia has close to the highest interest rates in the Group of 10, and in a slow-growth in world, capital will go to Australia,” Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York, said in a radio interview on “Bloomberg Surveillance” with Tom Keene. “The currency is more expensive than fundamentals justify.”

Australia’s dollar strengthened 0.3 percent to $1.0438 yesterday in New York trading and fell 0.2 to 96.43 yen.

The New Zealand dollar declined 0.2 percent to 84.32 cents after touching 84.93 cents, a 17-month high. The kiwi fell 0.6 percent to 77.90 yen.

Standard & Poor’s GSCI Index of 24 raw materials dropped 0.8 percent.

The Reserve Bank of Australia will hold its cash rate target unchanged at 3 percent today, according to the median forecast in a Bloomberg News survey.

Goldman Sachs Group Inc. and JPMorgan Chase and Co. last week dropped their forecasts for a rate cut at the first meeting of the year after a 76 percent rebound in the price of iron ore, the nation’s biggest export. The RBA has lowered the benchmark rate by 1.75 percentage points since Nov. 1 2011, as it seeks to spur industries that will help to offset a peak in resource investment.

China Growth

The Aussie and the kiwi were supported by data over the weekend showing China’s services industries grew at the fastest pace since August.

The non-manufacturing purchasing managers’ index rose to 56.2 in January from 56.1 in December, the Beijing-based National Bureau of Statistics and China Federation of Logistics & Purchasing said in a statement. A reading above 50 indicates expansion.

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

Australia’s imports probably outpaced exports by A$800 million ($834.7 million) in December, compared with an A$2.64 billion shortfall in November, according to economists surveyed by Bloomberg News.

The Aussie fell 0.5 percent during the past three months among the 10 developed-nation currencies monitored by the Bloomberg Correlation-Weighted Indexes. The kiwi gained 0.8 percent.

To contact the reporter on this story: Taylor Tepper in New York at ttepper2@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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