Aussie, Kiwi Lead G-10 Gains as China’s Li Sees Growth

Australia and New Zealand’s dollars led gains this month among the Group of 10 major developed currencies amid optimism over the two nations’ economies ahead of central bank meetings next month.

The Aussie remained stronger after a five-day advance, while its New Zealand peer touched a 2 1/2-year high after China’s Premier Li Keqiang said he’s confident growth will be in a “reasonable range” and the nation can’t ignore “difficulties and risks” from downward pressure on Asia’s biggest economy. The euro was near a three-week low before data forecast to show slowing inflation. Citigroup Inc. said it expects the yen to weaken as the Bank of Japan adds to stimulus by July.

“Aussie and kiwi can continue the trend of gains,” said Sam Tuck, a senior foreign-exchange manager at ANZ Bank New Zealand Ltd. in Auckland. Li’s comments “encouraged people to think that China is going to provide some more stimulus or is prepared to act against weakness, which gave people confidence that China is not going to slow down in the short term.”

The Australian dollar traded at 92.62 U.S. cents as of 6:54 a.m. in London, after rising over over five days to 92.59 yesterday, the longest winning streak since the eight sessions ended Oct. 18. New Zealand’s kiwi climbed 0.1 percent to 86.84 U.S. cents after touching 86.97, the strongest since August 2011. The Aussie’s 3.8 percent gain and the kiwi’s 3.5 percent advance this month are the most among developed-economy currencies.

The euro was little changed at $1.3746 from yesterday, when it touched $1.3729, the lowest since March 6. Europe’s common currency bought 140.46 yen, poised for a 0.4 percent slide this week. For the month, it is down 0.4 percent versus the greenback and is little changed against the yen.

Improvement Signs

Japan’s currency was little changed at 102.17 per dollar, poised for a monthly slide of 0.4 percent. It has strengthened 3.1 percent since Dec. 31.

The Reserve Bank of Australia will meet on April 1. Governor Glenn Stevens said this week there were signs domestic consumption is improving. Economists surveyed by Bloomberg News this month predict policy makers will raise the cash rate a quarter-percentage point to 2.75 percent by the first quarter of 2015.

Interest-rate swaps data compiled by Bloomberg show traders are certain New Zealand’s central bank will lift borrowing costs at its next policy review on April 24. Governor Graeme Wheeler raised the official cash rate by a quarter point to 2.75 percent on March 13, becoming the first central banker from a developed nation to tighten this year.

Growth Resilience

Li said economic development in China, the biggest market for Australian and New Zealand exports, has “great resilience and room,” in remarks from a statement posted on the Chinese government’s website. The nation has policies in reserve to deal with any economic volatility this year, Li said in comments made at an economic meeting in Liaoning province on March 26, according to the statement.

Australia’s dollar is poised to extend its rise to 95 U.S. cents after completing a trading pattern known as an inverted head-and-shoulders, according to analysts at Bank of America Merrill Lynch and Royal Bank of Scotland Group Plc.

The Aussie has gained 3.9 percent in March, and 7 percent since touching a 3 1/2-year low of 86.60 U.S. cents on Jan. 24, which formed the head in the pattern.

Deflation Risk

Consumer prices in the euro area probably increased 0.6 percent in March from a year earlier, according to the median estimate of economists in a Bloomberg survey before the European Union’s statistics office releases its initial estimate on March 31. That compares with a final reading for February of a 0.7 percent increase.

“Disappointing inflation data will heighten market expectations of an ECB rate cut,” said Masato Yanagiya, the head of foreign exchange and money trading in New York at Sumitomo Mitsui Banking Corp. “Policy makers are not happy to see the euro nearing $1.40, so they will probably try to talk it down by controlling easing expectations.”

ECB Governing Council member Luis Maria Linde said on March 26 policy makers take the risk of deflation seriously and more monetary easing hasn’t been ruled out. The ECB lowered its benchmark interest rate to a record 0.25 percent in November to spur economic growth. The central bank will meet on April 3.

Reports this week showed declines this month in gauges for business climate and manufacturing in Germany, the currency bloc’s biggest economy.

In Japan, Citigroup expects additional BOJ easing in June or July to drive the yen down to the 108-110 per dollar level, Tokyo-based strategist Osamu Takashima wrote in a research note dated yesterday.

The BOJ will add to monetary easing between now and the end of June, according to 35 percent of economists in a Bloomberg survey conducted from Feb. 26-March 4. Governor Haruhiko Kuroda and his policy board will next meet on April 7-8.

(Corrects percentage in final paragraph.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE