The Australian dollar touched its highest level in almost two months as Cyprus agreed to the outlines of an international bailout, spurring demand for higher-yielding assets.
The Aussie and New Zealand’s dollar climbed against the yen after initial reports of a tentative accord reached by Cyprus with the so-called troika of the European Central Bank, European Commission and International Monetary Fund. The currencies were also supported as Asian shares rallied.
“The Aussie has been one of the outperformers over the past few weeks and might continue to be well underpinned considering we’ve now got this deal,” said Stan Shamu, a markets strategist with IG Markets Ltd. in Melbourne. “Maybe the Aussie will put on its risk hat again and we’ll see it rally in line with commodities, should commodities get a kick up from the Cyprus deal.”
The Australian dollar rose as high as $1.0461, the strongest since Jan. 30, before trading little changed at $1.0450 as of 4:54 p.m. in Sydney. It climbed 0.4 percent to 99.06 yen. New Zealand’s currency slipped 0.1 percent to 83.49 U.S. cents and gained 0.2 percent to 79.15 yen.
The MSCI Asia Pacific Index of shares climbed 1 percent.
Australian dollar gains today extend a three-week advance fueled by investors’ speculation the nation’s banks will be untouched by concerns in Europe that deposits are under threat.
Under the accord between Cyprus and the troika, deposits below the European Union guarantee ceiling of 100,000 euros ($130,000) will be protected, and a loss of no more than 40 percent will be imposed on uninsured depositors at the Bank of Cyprus, two EU officials said. Uninsured depositors at Cyprus Popular would largely be wiped out, two other officials said.
“You saw a bit of safe-haven buying last week and, given that our bank ratings are still among the highest in the world, investors are looking favorably on Australia and New Zealand,” said Tim Kelleher, head of institutional foreign-exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia in Auckland.
National Australia Bank Ltd. raised its profile for the Aussie, removing forecasts for the currency to trade below parity by year-end. The local dollar will weaken to $1.03 by mid-year and $1.01 by Dec. 31, up from a previous prediction for it to trade at $1.01 and 99 U.S. cents respectively, analysts led by Peter Jolly, global head of research in Sydney, wrote in a research note today. NAB cut its year-end forecast for the New Zealand dollar to 85 U.S. cents from 87 earlier.
Futures traders boosted bets by the most in nine months that the Australian dollar will rise against the greenback.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- was 54,055 on March 19, versus net longs of 23,266 a week earlier, data from the Washington-based Commodity Futures Trading Commission show.
Australia’s 10-year bond yield rose eight basis points, or 0.08 percentage point, to 3.63 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations climbed to 2.94 percent from 2.92 percent last week.