The Australian and New Zealand dollars rose, snapping two days of declines, after an increase in a private manufacturing gauge for China bolstered the export prospects for the South Pacific nations.
The so-called Aussie and kiwi advanced against the yen after Japan’s finance minister reiterated that he’s ready counter currency strength. Gains in both currencies were limited before Spain auctions bills today amid renewed concern that Europe’s debt crisis is worsening. The 49.5 preliminary reading for a Chinese purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a final 48.2 for June.
“We’re all feeling a bit gloomy at the moment so the fact that we ended up with a less gloomy number in China is quite encouraging,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc. “The Aussie has taken some heart from that.”
The Australian dollar rose 0.4 percent to $1.0304 as of 3 p.m. in Sydney from yesterday, when it dropped 1.2 percent. The Aussie added 0.3 percent to 80.65 yen from yesterday, when it declined 1.3 percent.
Australia’s 15-year bond yields earlier declined as much as 3.5 basis points to 3.025 percent, the lowest rate on record for the country’s longest-dated bond.
New Zealand’s dollar, known as the kiwi, climbed 0.6 percent to 79.21 U.S. cents from yesterday, when it lost 1.5 percent. The currency gained 0.4 percent to 61.99 yen.
Along with HSBC and Markit’s PMI gauge, the Conference Board’s leading economic index for China rose 0.1 percent in June to 234.9, according to a statement released today. China is Australia’s biggest trading partner and New Zealand’s second-biggest export market.
In a speech today, Reserve Bank of Australia Governor Glenn Stevens sought to ease concern his nation is vulnerable to shocks from China, a domestic housing slump and global financial stress, saying it remains a “lucky country” with a favorable outlook.
Stevens said he expects Australia’s inflation in the second quarter to be near 2 percent. Economists surveyed by Bloomberg are predicting a 1.3 percent rise in consumer prices last quarter from the same three-month period last year before the Bureau of Statistics release its figures tomorrow. The RBA aims to keep annual underlying inflation in a range of 2 percent to 3 percent.
Demand for the Aussie and kiwi was supported against the yen amid speculation Japan will step in to weaken the nation’s currency. Finance Minister Azumi said the yen’s gain is one-sided and doesn’t reflect economic fundamentals.
“A factor that could be supporting the Aussie and the kiwi is the increased rhetoric from the Japanese policy makers,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “Risk of intervention could be a factor helping risk sentiment in Asia, but the main concern is still in Europe.”
The yen tends to strengthen during periods of financial turmoil because Japan’s current-account surplus makes it less reliant on foreign capital. A stronger currency hurts exporters by making their goods more expensive overseas.
The yield on Spain’s 10-year bond jumped to as much as 7.565 percent yesterday, the highest since November 1996, while the cost of insuring against default on the nation’s sovereign debt also soared to a record. Moody’s Investors Service lowered the credit rating outlooks for Germany, the Netherlands and Luxembourg to negative.
“Things in Europe are likely to get worse before they get better,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The contagion effect is ongoing. We expect the Aussie to remain close to parity over the next few months.”