Aussie Dollar Rises a 2nd Day on Business Conditions; Kiwi Gains

Australia’s dollar rose for a second day, rebounding from a 3 1/2-year low touched last week, after data today showed a gauge of business conditions gained.

The Aussie advanced after a technical indicator signaled the currency had fallen too fast and concern eased over the shadow-banking system in China, the South Pacific nation’s biggest trading partner. New Zealand’s currency climbed before Reserve Bank Governor Graeme Wheeler sets policy this week as traders bet he’ll raise the benchmark rate this year.

“We had better-than-expected business conditions and confidence numbers” supporting the Aussie, said Divya Devesh, a foreign-exchange analyst at Standard Chartered Plc in Singapore. “The Aussie was also looking a bit oversold at levels below 87, so I think it’s the combination of” today’s data and abating concern about China that are boosting the currency, he said.

The Australian dollar rose 0.4 percent to 87.76 U.S. cents as of 5:01 p.m. in Sydney after climbing 0.6 percent yesterday. It touched 86.60 on Jan. 24, the weakest since July 2010. New Zealand’s kiwi dollar gained 0.4 percent to 82.67 U.S. cents.

Australia’s 10-year government bond yield added one basis point to 4.03 percent, after touching the lowest level since Oct. 31 at 4.02 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates that are sensitive to rate expectations, rose two basis points to 3.83 percent.

An index of Australian business conditions climbed to 4 in December, the highest since March 2011, from minus 3 the previous month, according to data from National Australia Bank Ltd. released today. Its gauge of business confidence held at 6.

Default Averted

Industrial & Commercial Bank of China Ltd., the nation’s biggest bank, said investors in a troubled high-yield trust can recoup their funds, averting a threatened default that helped spur a selloff in emerging-market currencies and stocks.

The Aussie’s 14-day relative strength index versus the dollar fell to 32 on Jan. 24, the least since December and near the 30 level that signals to some traders an asset has fallen too far, too fast and may be due to reverse course.

The Aussie may stabilize at about 86 U.S. cents to 89 in the near term, before declining to 84 by the end of 2014, according to Ray Attrill, the global co-head of currency strategy at National Australia Bank in Sydney.

‘The Aussie is looking pretty oversold,’’ he said. “Positioning does look quite stretched and the Aussie does look low in relation to short-term fair value estimates.”

Interest-rate swaps data compiled by Bloomberg show traders see a 54 percent chance the Reserve Bank of New Zealand will raise the nation’s cash rate from a record-low 2.5 percent as soon as its Jan. 30 meeting. The median estimate in a Bloomberg News survey of economists is for the rate to be unchanged.

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