The Australian and New Zealand dollars rebounded from five-month lows amid speculation their recent declines were excessive.
The currencies rose versus the majority of their peers as Asian stocks headed for their first advance in seven days on prospects the Federal Reserve will ease policy further to spur growth. Gains in the so-called Aussie and kiwi were limited as Greece prepares for a second election with the nation’s future in the euro bloc and an international bailout at stake.
“The Australian and New Zealand dollars have fallen too rapidly and we’re seeing some buying back in these currencies,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd. “Further stimulus from the Fed will be positive for the stocks and commodity markets, and thus for the currencies like the Aussie and kiwi.”
Australia’s dollar rallied 0.4 percent to 99.53 U.S. cents at 3:32 p.m. in Sydney from the close in New York yesterday, when it fell to 98.71, the weakest since Dec. 15. The currency bought 79.89 yen from 79.64. The New Zealand dollar rose 0.4 percent to 76.74 U.S. cents, after sliding to 76.24 yesterday, the least since Dec. 20. It advanced 0.3 percent to 61.59 yen.
The Australian dollar’s 14-day relative strength index against its U.S. counterpart was 26 yesterday, below the 30 level that some traders see as signaling an asset may reverse declines. The gauge for New Zealand’s currency fell to 20.
The MSCI Asia Pacific Index of stocks advanced 1 percent.
A loss of momentum in U.S. growth or increased risks to their economic outlook could warrant additional action to keep the recovery on track, several Fed policy makers said, according to minutes of the Federal Open Market Committee’s April 24-25 meeting released yesterday in Washington.
Yields on Australia’s benchmark 10-year notes added five basis points, or 0.05 percentage point, to 3.28 percent today, after touching a record low of 3.201 percent on May 15. Three-year yields also rose five basis points today to 2.61 percent.
Gains in the South Pacific nation currencies were limited after the European Central Bank said yesterday it will temporarily stop lending to some Greek banks to contain its risk.
The move comes after ECB President Mario Draghi acknowledged for the first time that Greece could leave the monetary union. While the bank’s “strong preference” is that Greece stays in the 17-nation euro area, the ECB will continue to preserve “the integrity of our balance sheet,” he said in a speech in Frankfurt yesterday.
Greece faces a fresh election on June 17 that may boost parties opposed to the conditions of its international bailouts, raising the specter of its exit.
“The markets are looking at a complete reversal of all the plans put in place towards the end of last year” in Europe, said Kara Ordway, a currency strategist at City Index Asia Pacific in Sydney. Greece’s possible exit from the euro is “really dragging the market. If this environment continues, certainly the Aussie and kiwi will go lower,” Ordway said.
The New Zealand dollar has weakened 5.4 percent in the past three months, making it the worst performer, according to Bloomberg Correlation-Weighted Indexes which track 10 developed-nation currencies. Australia’s currency depreciated 4.5 percent, the second-worst performer.
-- Editors: Naoto Hosoda, Ken McCallum