The Australian and New Zealand dollars rose against most major peers after a report showed Chinese imports grew more than economists estimated, boosting the South Pacific countries’ trade prospects.
Data yesterday showed inflation in China slowed, reducing prospects for monetary tightening by the nation’s central bank. The so-called Aussie held a two-day gain against the greenback before the Federal Reserve releases minutes of its March meeting. Treasurer Wayne Swan said today the Australian dollar is “defying gravity” as commodity prices fall. Local bonds dropped as stocks gained worldwide.
“The market is putting more focus on the fact that imports have rebounded very strongly,” said Khoon Goh, a senior strategist at Australia & New Zealand Banking Ltd. in Singapore. “Given that China imports from Australia, that is seen as benefiting Australia. Near term, there’s scope for the Aussie to go higher.”
The Australian dollar advanced 0.2 percent to $1.0507 as of 4:11 p.m. in Sydney from yesterday, after gaining 1 percent over the previous two sessions. It touched $1.0517, the strongest since Jan. 24. The Aussie climbed 0.3 percent to 104.13 yen from yesterday, when it touched 104.36, the highest since July 2008.
New Zealand’s dollar reached 85.38 U.S. cents, the strongest since September 2011, before trading at 85.29, little changed from yesterday. The currency rose 1.9 percent in the previous six sessions. It strengthened 0.1 percent to 84.52 yen.
Shipments to China climbed 14.1 percent in March from a year earlier, the customs administration reported today. Economists surveyed by Bloomberg expected a 6 percent increase. Exports grew 10 percent last month, for a trade deficit of $880 million. China is the biggest trading partner of both Australia and New Zealand.
Data yesterday showed consumer prices in China rose 2.1 percent in March from a year earlier, down from the 3.2 percent growth a month earlier. Economists in a Bloomberg poll expected a 2.5 percent increase.
Australian bonds fell, pushing the yield on 10-year debt up two basis points, or 0.02 percentage point, to 3.27 percent.
New Zealand sold NZ$2 billion ($1.7 billion) of bonds maturing in April 2020 to yield 3.15 percent.
The MSCI Asia Pacific Index of stocks climbed 0.9 percent.
“Increasing foreign demand for New Zealand government bonds and ongoing re-insurance inflows associated with the Christchurch earthquake have been a key feature behind the firm NZD,” Peter Dragicevich, a Sydney-based currency economist Commonwealth Bank, Australia’s largest lender, wrote in a report to clients today. “There appears to be a growing probability the New Zealand capital flows story will be given a further boost, driven by New Zealand’s possible inclusion in the benchmark World Government Bond Index.”
The kiwi dollar gained 5.4 percent this year, the best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Australian dollar has risen 3.2 percent.
The Reserve Bank of Australia has cut interest rates more than it otherwise would have because of the local currency’s strength, Assistant Governor Christopher Kent said at the Bloomberg Economic Summit in Sydney today.
“There are signs that the low level of interest rates is having some of the expected effects and these are likely to have further to run,” Kent said.
The RBA lowered the benchmark interest rate by 1.75 percentage points in the 14 months through December. The nation’s currency has held above parity with the U.S. dollar for more than nine months, the longest stretch above the threshold since it was freely floated in 1983.
Interest-rate swaps data compiled by Bloomberg show traders see a 19 percent chance the RBA will cut the benchmark at its next meeting on May 7.
In the U.S., minutes of the Fed’s March meeting are due for release today. Chairman Ben S. Bernanke left the pace of government and mortgage debt purchases at $85 billion a month and said further improvement in the U.S. labor market is needed for the central bank to consider reducing record monetary easing.
“It looks like the Aussie has positive momentum at the moment,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-biggest lender. “If the Fed looks like it won’t taper off quantitative easing, that would be positive for risk. Equities will go up further and the Aussie will rise.”
Westpac expects the currency to rise above $1.0510 over the next few days, according to Speizer.