Aussie Climbs With Stocks After China Unveils Economic Reforms

Australa’s dollar rose versus most of its major peers after Chinese leaders unveiled the biggest economic reforms since the 1990s, buoying the outlook for the South Pacific nation’s exports to the world’s No. 2 economy.

Demand for the Aussie and kiwi was boosted as Chinese stocks advanced to a one-month high. Futures traders cut their bearish bets on the Aussie last week by the most in almost six months. New Zealand’s dollar extended gains to reach a five-year high against its Australian counterpart after a private report showed the smaller nation’s services industry expanded at a faster pace last month.

“I’m relatively bullish on the Australian dollar,” said Hideki Shibata, a senior interest-rate and currencies strategist at Tokai Tokyo Research Center Co. “It’s a positive for the Aussie that concern about China is easing.”

The Aussie jumped 0.5 percent to 94.14 U.S. cents as of 7:51 a.m. in London, while New Zealand’s dollar appreciated 0.5 percent to 83.78 U.S. cents. The kiwi was at NZ$1.1234 per Aussie after earlier climbing to NZ$1.1198, the strongest since October 2008.

The Shanghai Composite Index of shares jumped 2.9 percent for the highest close since Oct. 22. China pledged to allow more private investment in state-controlled industries while couples can have two children if either parent is an only child, according to a Communist Party decision published by the official Xinhua News Agency on Nov. 15.

Net Shorts

Wagers on a decline in Australia’s currency against the U.S. dollar outnumbered those on a gain by 35,809 on Nov. 12, according to figures from the Washington-based Commodity Futures Trading Commission. Net shorts rose 43 percent from a week ago, the biggest increase since May 21.

Australia’s 10-year government note yields were little changed at 4.21 percent. They rose seven basis points, or 0.07 percentage point, last week.

There’s a 24 percent likelihood that the Reserve Bank of Australia will lower the benchmark rate from 2.5 percent by April, according to data on overnight-index swaps compiled by Bloomberg. Traders see an 84 percent chance that the RBNZ will raise the official cash rate by that month from a record low of 2.5 percent.

The Performance of Services Index increased to 58.2 in October, a report from Bank of New Zealand Ltd. and Business NZ showed today. The gauge hasn’t been above that level since November 2007. The reading was 56.4 in September.

New Zealand’s two-year swap rate was 65 basis points higher than its equivalent in Australia. The two inverted this year and the gap widened to 84 points in August, the most since December 2008. One basis point is 0.01 percentage point.

“The Reserve Bank of New Zealand will start hiking interest rates in April next year,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “I expect it to see NZ$1.10 by the first quarter,” he said of the Aussie-kiwi rate.

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