Aussie Dollar Advances After Economy Expanded, Before EU Summit
The Australian dollar rose against most of its 16 major peers after a report showed the country’s gross domestic product expanded more than economists forecast last quarter.
Demand for the Australian and New Zealand dollars was supported after Financial Times reported European governments may combine their temporary and planned permanent rescue facilities before a summit this week. The South Pacific nations’ currencies slid late yesterday after Standard & Poor’s put Europe’s bailout fund on watch for a credit downgrade.
“The GDP data was strong and that is bullish for the Aussie,” said Thomas Harr, head of Asian currency strategy Standard Chartered Plc in Singapore. “It suggests that the economy is still doing quite well. I think it will take back some of the rate-cut expectations.”
The Australian dollar advanced 0.3 percent to $1.0272 as of 11:43 a.m. in Sydney from $1.0245 yesterday in New York, when it fell 0.3 percent. The currency rose 0.3 percent to 79.86 yen. New Zealand’s dollar, nicknamed the kiwi, was little changed at 78.05 U.S. cents from 77.98 cents. It rose to 60.68 yen from 60.59 yen yesterday, when it dropped 0.2 percent.
Australia’s gross domestic product expanded 1.0 percent in the third quarter from the previous three months, the Bureau of Statistics said in Sydney today. That compared with the median of 24 estimates in a Bloomberg News survey for a 0.8 percent gain. Compared with a year earlier, the economy expanded 2.5 percent in the third quarter, today’s report showed. Economists forecast a 1.9 percent year-over-year gain.
The Financial Times reported yesterday the funding proposal was being debated ahead of the Dec. 8 summit. Operating the European Stability Mechanism in combination with the 440 billion-euro ($590 billion) temporary fund next year would potentially boost Europe’s anti-crisis resources to 940 billion euros.
The Australian and New Zealand currencies declined late yesterday after S&P added the Europe’s bailout fund to the 15 euro nations placed on a negative outlook before a summit of European leaders this week. Germany, France, Netherlands, Austria, Finland and Luxembourg -- the euro area’s six AAA rated countries -- are among the nations being placed on “CreditWatch negative” by S&P.
“We could lower the long-term credit rating on EFSF by one or two notches if we were to lower the ‘AAA’ sovereign ratings, which are currently on CreditWatch, on one or more of EFSF ‘s guarantor members,’’ S&P said in a statement yesterday.
‘‘We’ll tread waters until the European summit,’’ said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s biggest interdealer broker. ‘If they can deliver, obviously the Aussie dollar will get a significant boost.”
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