The Australian dollar rose against its U.S. counterpart on speculation U.S. President Barack Obama’s re-election will boost prospects for monetary stimulus by the Federal Reserve that tends to debase the greenback.
The so-called Aussie strengthened after Obama defeated Republican challenger Mitt Romney, according to television network projections that show the president winning the electoral votes needed for a second term. New Zealand’s currency also reversed losses from earlier today as Asian stocks extended an advance following the election outcome.
“The Aussie has popped in a very short-term market reaction,” said Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank. With Obama poised to begin another four-year term “the consistent approach that will be executed by the current administration is positive. The one thing we don’t need these days is uncertainty.”
The Australian dollar gained 0.2 percent to $1.0451 as of 4:45 p.m. in Sydney after earlier falling as much as 0.2 percent. The currency’s implied three-month volatility fell to 8 percent, the lowest since 2007.
The New Zealand dollar added 0.1 percent to 82.78 U.S. cents, following an earlier decline of as much as 0.4 percent.
The yield on Australia’s 10-year note climbed one basis point to 3.19 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell five basis points to 2.70 percent.
The MSCI Asia Pacific Index of shares gained 0.6 percent.
Romney on Fed
Romney had said he disagrees with the Fed measures to stimulate the economy and would replace Chairman Ben S. Bernanke at the end of his term in January 2014.
In New Zealand, the central bank said in its half-yearly Financial Stability Report released today that “a period of further strength remains possible” for the local dollar.
“It’s hard at this point to see any factor that would lead to a major depreciation in the exchange rate in the short term,” Reserve Bank of New Zealand Governor Graeme Wheeler told parliament’s finance select committee today.
The New Zealand dollar has risen 5 percent this year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Its Australian counterpart has gained 0.5 percent.