Aussie Climbs to Four-Week High on Home Prices; Morgan Says Buy

The Australian dollar climbed to its highest level in four weeks as home prices rose at the fastest pace since 2010 and business confidence strengthened, adding to signs the nation’s economy is gaining momentum.

Australian bonds fell, pushing the yield premium two-year notes offer over the U.S. to the highest level since April 2013. New Zealand’s currency also gained as Asian stocks advanced for a fifth day, spurring demand for higher-yielding assets. Appetite for the South Pacific nations’ currencies was also supported before Federal Reserve Chairman Janet Yellen delivers her first semi-annual monetary-policy testimony as investors weigh the pace of stimulus reductions in the U.S.

“The house price index continues to tick along nicely which should be supportive of the household sector, consumption and construction in the Aussie economy,” said Darryl Conroy, a Brisbane-based analyst at Suncorp Group Ltd. “The Aussie will remain range-bound in the 88 to 90-cent level.”

Australia’s dollar climbed 0.6 percent to 90.02 U.S. cents as of 4:48 p.m. in Sydney after touching 90.15, the highest since Jan. 14. It advanced 0.7 percent to 92.15 yen after reaching its highest level since Jan. 23. New Zealand’s kiwi climbed 0.3 percent to 82.93 U.S. cents and gained 0.4 percent to 84.88 yen.

House prices in Australia surged 9.3 percent in the final quarter of 2013 from a year earlier, the biggest increase in more than three years, statistics bureau data showed today. They rose 3.4 percent from the previous three-month period. Business confidence climbed in January for the first time in four months, a National Australia Bank Ltd. report showed.

Buy Aussie

Morgan Stanley recommends investors buy the Aussie versus the euro amid a divergence in inflation outlooks, central bank policy and stretched positioning.

The Aussie rose 0.5 percent to A$1.5178 per euro after touching A$1.5024 on Feb. 6, the strongest since Dec. 10. A break of the A$1.50 level would open the door for a possible move to A$1.45, analysts including Geoffrey Kendrick and Calvin Tse wrote in an e-mailed note to clients today.

Australia’s two-year yields rose four basis points, or 0.04 percentage points, to 2.85 percent or 2.54 percentage points more than similar-maturity U.S. Treasuries.

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