Feb. 29 (Bloomberg) -- Australia’s dollar advanced to a six-month high after government data showed retail sales rose in January, adding to speculation the Reserve Bank will keep the highest interest rates among major developed economies.
The so-called Aussie gained against the dollar and the yen after the European Central Bank awarded 529.5 billion euros ($712 billion) in a second round of three-year loans to banks, increasing the appeal of riskier assets. New Zealand’s dollar climbed to its strongest level in more than five months against the greenback after home-building approvals jumped last month.
The Australian retail sales figure “bucks the recent trend towards weakness, which I think is a positive,” said Todd Elmer, head of Group-of-10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore. “That has the potential to support interest-rate expectations, and that only adds to the attractiveness of the Aussie in a risk-on world.”
Australia’s dollar rose 0.1 percent to $1.0773 at 11:51 a.m. in New York after earlier climbing to $1.0856, the strongest since August. The Aussie added 1 percent to 87.48 yen. New Zealand’s currency advanced 0.3 percent to 84.01 U.S. cents. It earlier reached 84.71, the highest level since Sept. 5. The so-called kiwi strengthened 1.1 percent to 68.18 yen.
The ECB auction of three-year loans surpassed the 470 billion euros forecast by economists. The Frankfurt-based central bank said it will lend the funds to 800 financial institutions. In its first three-year refinancing operation in December, 523 banks borrowed 489 billion euros.
The Aussie and kiwi pared their gains against the dollar after Federal Reserve Chairman Ben S. Bernanke reduced speculation the central bank may provide more monetary stimulus.
Bernanke, speaking in a testimony to the House Financial Services Committee in Washington, said “in light of the somewhat different signals received recently from the labor market than from indicators of final demand and production, however, it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery.”
Australian retail sales climbed 0.3 percent last month from December, when they fell 0.1 percent, the Bureau of Statistics said in Sydney today. The result matched the median forecast in a Bloomberg News survey of economists and is the biggest gain since September.
Traders are expecting the central bank to reduce borrowing costs by 51 basis points, or 0.51 percentage point, over the next 12 months, a Credit Suisse AG index based on swaps showed. RBA Governor Glenn Stevens unexpectedly kept the nation’s benchmark interest rate unchanged at 4.25 percent on Feb. 7 after two consecutive quarter percentage-point cuts late last year.
Demand for the kiwi was supported after New Zealand’s home-building approvals rose 8.3 percent in January after gaining a revised 2.6 percent the previous month, a report showed today. That’s the fastest pace since October.
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