The Australian and New Zealand dollars rose against most major peers after China ramped up stimulus, spurring traders to pare their bearish bias on the currencies to the lowest since at least November.
Australia’s dollar jumped as much as 0.8 percent versus its U.S. counterpart Monday, extending two weeks of gains, after the People’s Bank of China announced it would cut the reserve-requirement ratio by one percentage point, the second reduction this year and the largest since November 2008. China is the biggest trading partner of both antipodean nations.
“This stimulatory move should boost risk appetite today,” Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland, wrote in a note to clients. The Aussie and kiwi will benefit, according to the note.
Australia’s dollar added 0.3 percent to 78.05 U.S. cents as of 1:48 p.m. in Sydney from Friday, when it completed a two-week 2 percent gain. New Zealand’s currency gained 0.4 percent to 77.10 U.S. cents, following a 1.9 percent advance last week.
The premium for three-month options to sell the Aussie against the dollar versus those to buy fell to as low as 1.67 percentage points, the least since Nov. 3, according to data compiled by Bloomberg on 25-delta risk reversals. The equivalent premium for the kiwi dollar against the greenback fell as low as 1.56 percentage point, the least since Oct. 10.
More than a third of Australia’s outbound shipments go to China, as do a fifth of New Zealand’s exports.
The Aussie has risen 2.6 percent against the dollar this month as a run of weaker-than-expected U.S. data led traders to pare expectations of an early Federal Reserve interest-rate increase. That follows a 7 percent drop in the first three months of the year.
New Zealand’s currency has gained 3.2 percent against its U.S. peer in April, after declining 4.2 percent in the first quarter.