Kiwi Dollar Climbs Against Major Peers on Rate Bets, Stock Gains

New Zealand’s dollar climbed against all its 16 major peers amid bets the country’s central bank will be the first among developed nations to raise interest rates.

The kiwi and Aussie gained against the greenback, snapping two-day declines, as Asian stocks rallied. The South Pacific nations’ currencies fell to their lowest levels in a week yesterday as the risk of a U.S. government shutdown cut demand for higher-yielding assets. Australian government bond yields touched a six-week low.

“With all the talk about a U.S. government shutdown, everybody’s forgotten that the Reserve Bank of New Zealand is one of the most hawkish central banks out there,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc. “I’m not surprised that the kiwi has picked up a little bit. I think it’s got more to do.”

The New Zealand dollar jumped 0.5 percent to 82.82 U.S. cents at 5:20 p.m. in Sydney from yesterday, when it touched 82.17, the lowest since Sept. 18. Australia’s dollar gained 0.2 percent to 93.86 U.S. cents, after reaching 93.39 yesterday, also the lowest since Sept. 18.

The MSCI Asia Pacific Index of stocks advanced 0.2 percent, snapping a two-day decline.

The kiwi and Aussie fell this week against the dollar, yen and euro as U.S. lawmakers continued to debate the budget, before federal spending authority runs out on Sept. 30 and a few weeks until the country hits its borrowing limit.

Lew’s Warning

U.S. Treasury Secretary Jacob J. Lew told Congress in a letter yesterday that the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.”

“Everyone’s been talking about the U.S. debt ceiling debate a little bit more, and using it as an excuse to take a little bit of risk off the table given the run-up in both antipodean currencies in the past few weeks,” said Michael Turner, a debt and currency strategist at Royal Bank of Canada in Sydney.

The kiwi has advanced 7.2 percent this month against the U.S. dollar, and has climbed 7.1 percent so far this quarter, making it the best performer among 16 major peers over both periods. The Aussie has risen 5.5 percent for the month, and 2.8 percent for the quarter.

Rate Bets

Traders see an 84 percent chance the RBNZ will raise borrowing costs from a record-low 2.5 percent by April next year, interest-rate swaps data compiled by Bloomberg show. They see a 58 percent probability the Reserve Bank of Australia will lower its cash target rate from a record low of 2.5 percent in the same period.

Australia’s benchmark 10-year government bond yield slid as low as 3.845 percent today, a level unseen since Aug. 14.

Australia extended its inflation-linked bond maturities to 22 years, selling A$2.1 billion ($2 billion) with the yield at the bottom of the target range. The 2 percent security due Aug. 21, 2035, sold at a price of A$96.943 per A$100 face amount, according to an e-mailed statement today from the Australian Office of Financial Management.

Foreign investors sold a net A$2.6 billion of Australian state government bonds in the second quarter, according to a separate report today by the statistics bureau. Australian banks bought a net A$5.9 billion of the debt in the same period, raising holdings to a record A$83 billion.

To contact the reporter on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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