Australia’s bonds fell, sending benchmark 10-year yields to a nine-month high, and the local dollar was supported amid speculation the central bank will hold interest rates unchanged tomorrow.
The so-called Aussie dollar gained against most of its major peers before data forecast to show the nation’s trade deficit narrowed. New Zealand’s dollar, nicknamed the kiwi, rose to the strongest since September 2011 versus the greenback as a rally in global stocks boosted demand for higher-yielding assets. The currency gained to a level unseen since July 2010 against its Australian counterpart.
“Stronger economic growth and leaving rates on hold would be positive for the Aussie,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The Reserve Bank will continue to wait and see the impact of earlier cuts. There just doesn’t seem to be the same level of anxiety there was last year.”
The yield on Australia’s 10-year bonds rose seven basis points, or 0.07 percentage point, to 3.59 percent at 4:41 p.m. in Sydney from Feb. 1. It earlier reached 3.61 percent, the highest level since May 2.
The Aussie advanced 0.3 percent $1.0435. It touched 96.79 yen, the highest since August 2008, before trading at 96.70, up 0.1 percent from last week’s close. The currency dropped to NZ$1.2269, the lowest since July 2010, before trading at NZ$1.2328.
The kiwi added 0.2 percent to 84.64 U.S. cents, after earlier touching 84.93, the highest since September 2011. It reached 78.81 yen, the strongest since August 2008, before trading at 78.43 from 78.38 at the end of last week.
The MSCI Asia Pacific Index of shares gained 0.9 percent, after the MSCI World Index climbed 0.8 percent on Feb. 1.
Imports probably outpaced exports by A$800 million ($834.7 million) in December, compared with a A$2.64 billion shortfall in November, according to the median estimate of economists surveyed by Bloomberg News. The Bureau of Statistics is due to release the data tomorrow.
TD Securities Inc. and the Melbourne Institute said today consumer prices in Australia rose 2.5 percent in January from a year earlier. The Reserve Bank of Australia targets inflation in a range of 2 percent to 3 percent on average.
“The RBA is in comfortable position to discuss the outlook and the risks at the board meeting tomorrow, without reducing the cash rate further, for now,” Annette Beacher, head of Asia-Pacific research for TD Securities in Singapore, said in a statement today.
Interest-rate swaps data compiled by Bloomberg show traders see a 17 percent chance the RBA will lower its benchmark rate by a quarter percentage point to 2.75 percent at its meeting tomorrow.
Goldman Sachs Group Inc. and JPMorgan Chase & Co. last week dropped their forecasts for a rate cut at the first meeting of the year after a 76 percent rebound in the price of iron ore, the nation’s biggest export. The RBA lowered the benchmark rate by 1.75 percentage points since Nov. 1, 2011, as it seeks to spur industries that will help offset a peak in resources investment.
Goldman Sachs and JPMorgan are among 24 of 28 economists in a Bloomberg survey forecasting the RBA will hold rates unchanged tomorrow, with the remaining four expecting a quarter percentage point cut.
The Aussie and kiwi were also supported by data over the weekend showing that China’s services industries grew at the fastest pace since August.
The non-manufacturing Purchasing Managers’ Index rose to 56.2 in January from 56.1 in December, the Beijing-based National Bureau of Statistics and China Federation of Logistics & Purchasing said in a statement yesterday. A reading above 50 indicates expansion.
China is Australia’s largest trading partner and New Zealand’s second-largest export destination.
Gains in the Aussie dollar were limited after building approvals unexpectedly declined. The number of permits granted to build or renovate houses and apartments in Australia fell 4.4 percent from November, when they rose a revised 3.4 percent, the Bureau of Statistics said today. The median estimate of economists in a Bloomberg survey was a 1 percent rise.
Futures traders decreased their bets that the Australian dollar will gain against the U.S. currency. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 85,296 on Jan. 29, compared with net longs of 97,011 a week earlier, figures from the Washington-based Commodity Futures Trading Commission showed.