Australia’s dollar rose for a third day after Turkey’s central bank raised rates to arrest a run on the lira that had roiled risk appetite. The kiwi gained before New Zealand’s central bank meets tomorrow.
The Aussie extended a rebound from the 3 1/2-year low touched Jan. 24 and bond yields jumped as reports over the past week showed inflation accelerated and business conditions improved before Australian policy makers convene next week. New Zealand’s currency added to this year’s strongest gain after the yen among major currencies before Reserve Bank Governor Graeme Wheeler sets policy. He signaled last month he expects to raise the benchmark rate in the first half of this year.
“There’s a keen sense that the authorities in some of the more vulnerable emerging markets are acting to address market volatility,” said Robert Rennie, global head of currency and commodity strategy at Westpac Banking Corp. in Sydney. “From the Aussie point of view, we’ve had a run of stronger data, so there’s a sense that there’s some economic improvement coming through.”
The Aussie rose 0.3 percent to 88 U.S. cents as of 5 p.m. in Sydney after climbing 1.1 percent over the previous two days. It touched 86.60 on Jan. 24, the weakest since July 2010. Australia’s 10-year government bond yield added nine basis points to 4.12 percent, after yesterday touching the lowest level since Oct. 31 at 4.02 percent. A basis point is 0.01 percentage point.
New Zealand’s kiwi dollar gained 0.2 percent to 82.75 U.S. cents. The country’s two-year swap rate, a fixed payment made to receive floating rates that are sensitive to rate expectations, was unchanged at 3.84 percent after reaching 3.89 percent on Jan. 6, the highest level since January 2011.
“For the kiwi, markets are extremely focused on prospects that the RBNZ will officially signal rate increases are coming this year, even if they don’t actually raise tomorrow,” Rennie said.
The Australian and New Zealand dollars gained, along with the currencies of South Africa and South Korea, after Turkish policy makers doubled the main interest rate at an emergency late-night meeting in Ankara. BlackRock Inc. said the moves will help restore investor confidence after a rout in developing-nation currencies and a $1.87 trillion selloff in global stocks in the week through Jan. 27.
“We’ve had very aggressive action from the Turkish central bank indicating that they’re quite serious about protecting their currency,” said Sam Tuck, a senior foreign-exchange manager at ANZ Bank New Zealand Ltd. in Auckland. “Some of the premium for the safety and stability of yen and the discount on emerging-market and riskier currencies like the Aussie and kiwi have been removed.”
An index of Australian business conditions climbed to 4 in December, the highest since March 2011, from minus 3 the previous month, according to data from National Australia Bank Ltd. released yesterday. Its gauge of business confidence held at 6.
Interest-rate swaps data compiled by Bloomberg show traders see an even chance the Reserve Bank of New Zealand will raise the nation’s cash rate from a record-low 2.5 percent tomorrow. The contracts indicate 66 percent odds that the rate will be 3.25 percent or higher by mid-year.
The median estimate in a Bloomberg News survey of economists is for the rate to be held unchanged tomorrow. A government report last week said the annual inflation rate reached the highest in almost two years at 1.6 percent.
“The January meeting will more likely set the stage for a March hike with more explicit wording and comments,” Gary Yau, a research associate at Credit Agricole CIB in Hong Kong, wrote in a note to clients. “We think a March hike remains the more likely scenario despite inflation picking up slightly faster than expected.”