Aussie, N.Z. Dollars Set for Weekly Advance Amid China Optimism

The Australian and New Zealand dollars were set for a weekly gain as the bigger nation’s Treasurer Wayne Swan said he’s optimistic about China’s outlook.

The so-called Aussie was near a three-month high before Chinese data next week forecast to show the world’s second-largest economy grew last quarter at the fastest pace in a year. The New Zealand dollar’s value relative to its trading peers was close to an all-time high amid speculation the Bank of Japan’s monetary easing will encourage domestic money managers to increase their investments overseas.

“The Australian and New Zealand dollars are likely to remain resilient,” said Kengo Suzuki, a currency strategist at Mizuho Securities Co. in Tokyo, a unit of Japan’s third-biggest financial group by market value. “The rising optimism toward China’s economy is underpinning both currencies.”

Australia’s dollar added 0.1 percent to $1.0550 at 4:39 p.m. in Sydney after reaching $1.0582 yesterday, the strongest since Jan. 11. It has gained 1.6 percent this week, set for the biggest five-day advance since the period ended March 15.

The New Zealand dollar, known as the kiwi, fell 0.1 percent to 86.22 U.S. cents. It has risen 2.3 percent since April 5, poised for the biggest weekly advance since the period ended June 15.

The kiwi’s trade-weighted currency index climbed to a record 79.67 yesterday, according to data from the Reserve Bank of New Zealand going back to 1985. It’s at 79.17 today.

China’s Economy

China’s gross domestic product probably expanded 8 percent in the three months ended March 31 from a year earlier, the fastest growth since the first quarter last year, according to the median estimate of economists in a Bloomberg News survey. The figures are due for release on April 15.

Swan said in Sydney today that a team of Australian and Chinese academics will undertake a research project on the Chinese currency’s internationalization. Direct trading between the Australian dollar and yuan started on April 10. China is Australia’s biggest export market.

Pacific Investment Management Co., which runs the world’s biggest bond fund in Newport Beach, California, recommends the South Pacific nation’s currency.

“The winners are ultimately countries with good growth and good balance sheets, including several emerging markets in Asia and Latin America,” Scott Mather, the head of global portfolio management at Pimco, wrote in a report on its website. “This trend also favors slower growing but sound balance sheet countries such as Australia, Canada and Scandinavian countries. We suggest investors consider diversifying into such currencies.”

Bond Yields

Australia’s 10-year government bonds yielded 3.3 percent today, with the yield premium over similar-maturity Japanese debt at 2.69 percentage points. The BOJ on April 4 doubled its monthly purchases of domestic bonds to step up its fight against deflation, lowering the nation’s yields.

“The BOJ is effectively telling domestic money managers not to invest in government bonds,” said Mizuho’s Suzuki. “We’re more likely to see these managers increase overseas investments,” including in Australia and New Zealand.

The Reserve Bank of New Zealand said today that non-residents held 68.3 percent of government bonds as of March 31, up from 60.9 percent a year earlier. The benchmark 10-year bond yield in the South Pacific nation fell one basis point to 3.35 percent.

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