New Zealand’s dollar gained to its highest in two and a half years against Australia’s after manufacturing in the smaller economy expanded last month, boosting prospects its Reserve Bank will raise interest rates.
The so-called kiwi matched its strongest level since September 2011 against the greenback after a manufacturing index rose to its highest in eight months and consumer confidence climbed. Australia’s currency fell versus the U.S. dollar as traders predicted its central bank will lower rates to a record this year.
“The RBNZ are likely to maintain a steady rates profile throughout this year, whereas data in Australia still suggests that we’ve going to get further rate cuts,” said Timothy Riddell, the Singapore-based head of global markets research at Australia & New Zealand Banking Group Ltd. “The data surprises seem to be supporting kiwi over Australia at the moment.”
New Zealand’s currency rose 0.4 percent to NZ$1.2219 per Aussie dollar at 4:46 p.m. in Sydney, after climbing to NZ$1.2197, the highest since July 2010. It gained 0.2 percent to 84.71 U.S. cents after touching 84.93, matching the most since September 2011. The kiwi advanced 0.4 percent to 79.28 yen. Australia’s dollar fell 0.2 percent to $1.0350 and was little changed at 96.88 yen.
New Zealand’s Performance of Manufacturing Index increased to 55.2 in January from a revised 50.4 in December, Business New Zealand and the Bank of New Zealand Ltd. said in a statement released in Wellington. A reading over 50 signifies expansion.
A gauge of consumer confidence climbed to 121 in February, the highest since June 2010, ANZ Bank New Zealand Ltd. and Roy Morgan Research said in a separate report.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, added three basis points, or 0.03 percentage point, to 3.01 percent, the highest since April 17. The RBNZ will probably raise rates by 0.25 percentage point over 12 months, according to a Credit Suisse AG index.
The kiwi may advance toward NZ$1.19 per Aussie dollar after breaking through the NZ$1.2220 level, said Stan Shamu, a markets strategist with IG Markets Ltd. in Melbourne.
“It certainly seems like the strategy among most traders is to sell Aussie on strength,” he said.
Reserve Bank of Australia Governor Glenn Stevens will probably lower the 3 percent key rate by 0.41 percentage point over 12 months, according to a separate Credit Suisse index. Australia’s benchmark borrowing cost reached 2.89 percent in January 1960, the lowest level on record in RBA data going back to 1959.
Australia’s 10-year bond yield rose for a third day, adding nine basis points to 3.59 percent.