The Australian and New Zealand dollars gained for the first time in three days against the greenback as technical indicators signaled the South Pacific currencies may be oversold.
The Aussie rebounded from the lowest in almost a year before testimony this week by Federal Reserve Chairman Ben S. Bernanke, who may counter speculation U.S. policy makers are close to reducing bond purchases under their quantitative easing program. New Zealand’s kiwi dollar gained against its 16 most-traded peers after the nation’s finance minister said home price gains will pressure the central bank to raise interest rates.
“The market has just moved too quickly ahead of what the Fed is actually likely to do,” said Kieran Davies, chief economist at Barclays Plc in Sydney. “We’re not expecting Chairman Bernanke to give any sign that tapering is going to happen soon.”
Australia’s dollar gained 0.3 percent to 97.61 U.S. cents as of 5:09 p.m. in Sydney from May 17. It fell 2.9 percent last week, touching 97.11, the lowest since June 5.
New Zealand’s kiwi dollar climbed 0.7 percent to 81.23 U.S. cents following a 2.1 percent slide over the previous two sessions. It dropped 2.9 percent last week.
The Australian dollar’s relative strength index versus the greenback was at 23.1, below the 30 level which indicates an asset’s price has fallen too rapidly and may be poised to reverse course. The New Zealand dollar’s RSI against its U.S. counterpart was at 32.5.
Fed Chairman Bernanke goes before a Joint Economic Committee of Congress in Washington on May 22 to testify on the economic outlook. Minutes of the Fed’s last policy meeting will be released the same day.
“His testimony takes on much greater focus given that expectations of early tapering are again gaining ground,” Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, wrote in a note to clients today. “Those expectations will likely be disappointed in the event that he reiterates an accommodative policy stance.”
The dollar has been boosted by speculation the U.S. central bank is going to signal a paring back of its purchases of $85 billion of Treasury and mortgage bonds a month. Fed Bank of San Francisco President John Williams said May 16 that quickening economic growth and gains in the job market may prompt a tapering as soon as this summer. Williams was one of the first Fed officials to advocate open-ended bond purchases.
Futures traders last week reversed their bets that the U.S. dollar will fall against the Aussie, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a rise in the greenback compared with those on a decline -- so-called net longs -- was 13,450 on May 14, compared with net shorts of 6,630 a week earlier.
The data shows U.S. dollar positions are “becoming stretched,” National Australia Bank Ltd. analysts, led by Global Head of Research Peter Jolly, wrote in an e-mailed note to clients today.
The New Zealand dollar rose after Finance Minister Bill English said rising home prices may force the Reserve Bank to tighten lending.
“These households heading into quite high debt to buy highly priced houses need to be aware at some stage the RBNZ will increase interest rates, particularly if the housing market keeps growing at rapid rates,” English said yesterday in an interview broadcast on Television New Zealand’s Q+A.
Low interest rates have helped fuel demand for property, raising prices at the fastest pace since 2007 and prompting the central bank to signal its concern about the risks if the housing bubble bursts. Central bank Governor Graeme Wheeler is reluctant to increase the official cash rate from a record low 2.5 percent because it may boost demand for the currency.
“The Reserve Bank is starting to lose sleep over the Auckland housing market,” Sharon Zollner, senior economist at ANZ Bank New Zealand Ltd. in Wellington, wrote in a report today. “This is one reason why markets are not pricing in interest rate cuts in response to the high NZD.”
The New Zealand dollar has surged 40 percent against the greenback since the end of 2008, the biggest advance among more than 150 currencies tracked by Bloomberg. The Australian dollar has gained 39 percent.
Traders see the RBNZ raising borrowing costs by 18 basis points over 12 months, a Credit Suisse Group AG index based on swaps showed. That compares with expectations for 32 basis points of interest rate cuts to Australia’s central bank over the period.
ASX Ltd., the operator of Australia’s main stock exchange, begins exchange-traded Australian government bonds tomorrow.
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