Aussie Rises as Gain in Consumer Confidence Pares Rate-Cut Bets
Australia’s dollar rose against most major peers after a gauge of consumer confidence in the nation surged to a two-year high, easing expectations the central bank will cut interest rates.
The so-called Aussie extended a rebound from the lowest in four months as swaps traders reduced bets that the Reserve Bank of Australia will lower the overnight cash-rate target from 3 percent in March. The value of New Zealand’s dollar relative to its major trading partners climbed to a 5 1/2-year high as the nation’s Finance Minister Bill English said he won’t spend taxpayer money on intervention.
“The odds of a RBA rate cut in March have now slipped a little bit” after the release of the consumer-confidence survey, said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp., Australia’s second-largest lender by market value. “The near-term risks are that it can head higher,” he said, referring to the Australian dollar.
Australia’s currency gained 0.4 percent to $1.0343 as of 4:52 p.m. in Sydney after touching $1.0227 yesterday, the lowest since Oct. 15. The New Zealand dollar, known as the kiwi, added 0.2 percent to 84.17 U.S cents following a 0.6 percent advance.
Westpac and Melbourne Institute said today that their gauge for Australian consumer confidence jumped 7.7 percent in February to the highest level since December 2010.
Traders see a 41 percent chance that the RBA will cut the benchmark rate to 2.75 percent next month, according to data on overnight-index swaps compiled by Bloomberg. There was a 51 percent probability yesterday.
Australia’s three-year government note fell for a second day, with yields climbing six basis points, or 0.06 percentage point, to 2.84 percent. New Zealand’s two-year interest-rate swap touched 2.96 percent, matching the highest since April 17.
JPMorgan Chase & Co.’s trade-weighted exchange rate index for New Zealand’s dollar climbed to 147.6 yesterday, the highest since July 2007 and is up 4.4 percent from a year ago.
Finance ministers and central-bank governors from Group of Seven nations released a statement yesterday, reaffirming their commitment to market-determined currency rates. Officials from the G-20, which includes the G-7 and emerging economies such as Brazil, China and India, meet in Moscow on Feb. 15-16.
“We’re not willing to take the kind of huge risks involved in large scale speculation in the exchange rate with taxpayer dollars,” English told reporters in Wellington. “To influence the exchange rate you need a couple of hundred billion U.S. in the bank so they take you seriously. We’d be out in the war zone with a peashooter.”
A gauge of homes prices climbed 7.2 percent last month from a year earlier, the Real Estate Institute of New Zealand said in a statement yesterday. The index reached an all-time high in November and remained near that level in January.
“An important part of the reason why the kiwi tries so strong is because New Zealand’s economy is relatively better than many other economies,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “It’s very unlikely that the New Zealand government or the RBNZ will intervene to push down the kiwi dollar,” he said, referring the nation’s central bank.
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