Aussie Hits November High After Jobs; Kiwi Strongest Since 2011

Australia’s dollar reached a more than four-month high versus the greenback after unemployment unexpectedly fell for the first time since September.

The Aussie had pared gains after data showed China’s exports and imports unexpectedly fell. The currency rose for a third day against its U.S. peer after today’s data followed reports yesterday showing home loans rose at the fastest pace in five months and consumer confidence rebounded. New Zealand’s dollar touched the strongest since August 2011 after a gauge of manufacturing increased to the highest since July.

“The unemployment rate is really key here, and the employment growth figure was solid as well,” said Greg Gibbs, the Singapore-based head of Asia Pacific markets strategy at Royal Bank of Scotland Group Plc. “Clearly the Australian dollar has benefited from that.”

Australia’s dollar rose 0.6 percent to 94.43 U.S. cents as of 5:18 p.m. in Sydney from yesterday, after touching 94.44, the most since Nov. 20. The kiwi added as much as 0.4 percent to 87.46 U.S. cents and traded at 87.43.

Australia’s 10-year government bond yield fell two basis points, or 0.02 percentage point, to 4.05 percent, after declining to as low as 4.04 percent, the least since March 17.

Australia’s unemployment rate fell to 5.8 percent in March, the lowest since November. Australian employers added 18,100 jobs in the month, compared with a median estimate of a 2,500 gain in a Bloomberg News economist survey.

China Trade

Chinese exports fell 6.6 percent in March, the customs administration said in Beijing today, extending the steepest drop since 2009 in February and missing the estimate for a 4.8 percent gain in a Bloomberg survey of economists. Imports fell 11.3 percent, compared with a median forecast for a 3.9 percent gain, leaving a trade surplus of $7.7 billion.

“It’s surprising and disappointing to see that softness in China’s March trade numbers,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “It’s a definite setback for what has been a very positive mood in global markets, and particularly in Asian currencies. The Aussie seemed to be on track for a run at 95 U.S. cents, but the China trade number was a definite setback.”

The Australian dollar has enjoyed its best start to a year since 2010, helped by the return of Japanese retail investors to Aussie uridashi bonds. The currency has gained 4.7 percent in 2014 against nine developed-market peers on Bloomberg Correlations-Weighted Indexes. Uridashi issuance linked to the Aussie reached the highest since November last month, according to data compiled by Bloomberg on the notes marketed to individuals.

Fair Value

The Aussie is about 6 percent too high relative to a UBS AG fair-value model that replicates the RBA’s, and is probably already at levels that are troubling for the central bank, said Matthew Johnson, a Sydney-based rates strategist at UBS AG, said during a briefing today.

“We’re likely to see a growth downgrade and an inflation downgrade from the RBA and if inflation no longer goes to 3 percent, then the RBA may have scope to start talking the currency down again,” he said.

The RBA dropped its easing bias in February and raised its growth and inflation forecast after fourth-quarter inflation unexpectedly accelerated above the mid-point of the central bank’s target range. The next inflation reading is due April 23.

“If we get a low inflation print for Q1 and the currency sticks up around 94 cents, I think the RBA inflation forecast will be cut in their May forecasting round and that will free them up to say something about the currency once again,” Johnson said.

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