New Zealand Dollar Gains, Bonds Decline as Economy Accelerates

New Zealand’s dollar rose against all of its major peers after data showed the nation’s economy grew at the fastest pace in three years last quarter.

The nation’s bonds fell for the first time in seven days on figures showing gross domestic product rose 1.5 percent from the previous three-month period, exceeding the 0.9 percent median estimate in a Bloomberg News poll. Demand for the so-called kiwi and Aussie dollars was supported after Chinese manufacturing accelerated. Australian Prime Minister Julia Gillard retained leadership of the governing Labor party after an uncontested ballot today.

“It looks like buoyant economic activity in New Zealand will be sustained,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “That’s swayed some doubts about the New Zealand economy and seen the New Zealand dollar enjoy a pretty strong bounce.”

The kiwi rose 0.4 percent to 82.62 U.S. cents at 5:09 p.m. in Sydney. The currency advanced 0.2 percent to 79.14 yen. The Australian dollar traded at $1.0376 from $1.0379 yesterday. It fell 0.3 percent to 99.39 yen from yesterday, when it rose 1 percent.

New Zealand’s GDP growth was almost twice as strong as the Reserve Bank’s 0.8 percent forecast. The nation’s 10-year bond yield climbed five basis points to 3.73 percent The two-year swap rate, a fixed payment made to receive a floating rate, rose five basis points to 2.94 percent. A basis point is 0.01 percentage point.

“The Reserve Bank may have to rethink their expectation that they can hold off on rate hikes until next year,” Bank of New Zealand’s Jones said.

Chinese Manufacturing

The preliminary reading for a Purchasing Managers’ Index measuring Chinese manufacturing rose to 51.7 in March from 50.4 in February, according to a statement from HSBC Holdings Plc and Markit today. Economists had predicted a 50.8 level and readings above 50 indicates expansion. China is the biggest trading partner for Australia and New Zealand.

The Reserve Bank of Australia sold A$26 million ($27 million) more of the nation’s dollars last month than it purchased from the category of buyers that can include foreign central banks, according to data from the central bank. That’s down from A$43 million in net sales in January.

Deputy RBA Governor Philip Lowe said earlier this week a stronger currency and higher savings rate have helped contain inflation and allowed lower interest rates even as the mining industry boomed.

“These factors have helped Australia to digest a huge investment boom without generating substantial imbalances in the economy,” he said on March 19 in Sydney.

Australian bonds maintained losses, with yields on three-year notes rising eight basis points to 3.04 percent. The 10-year yield climbed seven basis points to 3.58 percent.

Prime Minister Gillard retained leadership of the governing Labor party after predecessor Kevin Rudd declined to challenge in a ballot today. No rivals stood against either Gillard or Deputy Prime minister and Treasurer Wayne Swan for their roles, Labor Party official Chris Hayes told reporters in Canberra today.

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