Aussie Rallies From 3-Month Low on Europe Fund, Iron Ore

The Australian dollar rallied from a three-month low reached yesterday after finance ministers in Europe declared the region’s permanent aid fund operational and gains in commodity prices boosted demand for the currency.

The so-called Aussie climbed versus its U.S. counterpart following a slide last week that was the biggest in five months, after finance ministers from the euro area’s 17 nations set up a full-time fund to aid the region’s debt-ridden countries. Prices for iron ore, Australia’s key export, rose yesterday to the highest in more than a month. Demand for New Zealand’s dollar was tempered after a report today showed charge-card spending fell more than economists forecast.

“There’s a lack of bad macroeconomic news out there to push the Aussie lower,” said Andrew Salter, a strategist in Sydney at Australia & New Zealand Banking Group Ltd. “Anything that takes a euro catastrophe out of the equation is positive for risk sentiment.” Gains in iron prices have also underpinned the Aussie, he said.

The Australian dollar added 0.4 percent to $1.0231 at 4:40 p.m. in Sydney after touching $1.0149 yesterday, the lowest since July 13. The Aussie fell 1.8 percent in the week through Oct. 5, the biggest drop since the period ended May 4. It climbed 0.5 percent to 80.19 yen today.

New Zealand’s currency, nicknamed the kiwi, bought 82.26 U.S. cents from 81.93 yesterday. It rose 0.5 percent to 64.47 yen.

Iron Ore

Physical iron ore with 62 percent content at the Chinese port of Tianjin jumped 6 percent yesterday to $110.40 a ton, the highest close since Aug. 16, according to The Steel Index Ltd. Markets in China, Australia’s biggest trading partner, reopened yesterday after national holidays last week.

Euro-area finance ministers yesterday declared the 500 billion-euro ($649 billion) European Stability Mechanism operational, while saying that Spain, its biggest potential near-term customer, isn’t on the verge of tapping it. Ministers from all 27 nations in the European Union will convene in Luxembourg today.

The Aussie has weakened 3.8 percent in the past three months, the worst performance after the U.S. dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi lost 0.5 percent.

Forecasts Cut

Gains in the South Pacific currencies were tempered after the International Monetary Fund cut its global growth forecasts. The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today. That compares with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013.

A gauge of Australian business confidence rose to zero last month from minus 3 in August, according to results released today of a National Australia Bank Ltd. survey of more than 400 companies taken Sept. 18 to Oct. 1.

Australia plans to sell 16 1/2-year debt tomorrow, the longest-maturity bonds on record in government data stretching back two decades. The nation’s 10-year yield was at 3.07 percent from 3.08 percent yesterday.

In New Zealand, the value of transactions on electronic cards fell 0.6 percent in September from the previous month, when it rose a revised 2.7 percent, the statistics bureau said today in Wellington. The median estimate of economists was a 0.3 percent decline in spending, according to a Bloomberg News survey before the data were released.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.635 percent.

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