Aussie Advances After Retail Sales, Trade Balance Data

Australia’s dollar rose after reports today showed improvement in retail sales and trade, boosting prospects the Reserve Bank will leave borrowing costs unchanged at a meeting next week.

Gains in the so-called Aussie and its New Zealand counterpart were tempered on speculation any measures from European Central Bank policy makers meeting today won’t be enough to resolve the region’s debt crisis. The Federal Reserve yesterday refrained from new action to stimulate the world’s largest economy. The so-called kiwi strengthened after whole-milk powder prices climbed for the first time in six weeks.

The Aussie “may pop on the back of today’s data,” said Gavin Stacey, chief rate strategist at Barclays Plc in Sydney. “Without the ECB, the Australian dollar could have had a more decent pop. It’s more likely the ECB disappoints than delivers on expectations.”

The Australian dollar advanced 0.2 percent to $1.0478 as of 4:31 p.m. in Sydney, after dropping 0.4 percent yesterday, the most since July 23. The Aussie gained 0.2 percent to 82.19 yen. New Zealand’s currency, known as the kiwi, added 0.2 percent to 80.88 U.S. cents. It rose 0.2 percent to 63.44 yen.

Retail sales in Australia climbed 1 percent in June after a revised 0.8 percent advance in the previous month, the Bureau of Statistics said today. The nation had a trade surplus of A$9 million ($9.4 million) in the same period, compared with estimates for a A$375 million shortfall, a separate report showed.

RBA Bets

Interest-rate swaps data compiled by Bloomberg show a 79 percent chance RBA policy makers will keep the overnight cash-rate target at 3.5 percent on Aug. 7. That’s up from the 38 percent odds seen on July 19.

ECB officials gathering today are expected to keep borrowing costs at a record-low 0.75 percent, according to 51 of 55 economists in another Bloomberg poll, with the remainder predicting a cut to 0.5 percent.

“There will be some segment of investors disappointed if the ECB stops short of reactivating the Securities Markets Program or giving an explicit signal that it intends to do so,” Todd Elmer, Singapore-based head of Group-of-10 currency strategy for Asia excluding Japan at Citigroup Inc., said in reference to the bank’s asset-purchase program.

‘Major Negative’

“Disappointment from the ECB will be a major negative for risk assets, including the Aussie,” he said.

At the conclusion of a two-day meeting yesterday, the Federal Open Market Committee said the U.S. economy “decelerated somewhat” in the first half of 2012 and it will “provide additional accommodation as needed.”

The Aussie has advanced 4.7 percent in the past three months, the best performance after the yen among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi gained 2.9 percent in the same period.

New Zealand’s dollar rose after milk powder prices for October delivery increased 4.5 percent, according to a trade-weighted index on Fonterra Cooperative Group Ltd.’s GlobalDairyTrade website. Auckland-based Fonterra accounts for about 40 percent of the global trade in dairy products.

Australia’s 10-year government bond yield climbed three basis points, or 0.03 percentage point, to 3.15 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose two basis points to 2.82 percent.

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