Aussie, Kiwi, Krone Outperform in Quarter on Commodities Rebound

  • Reduced central-bank stimulus, slower Fed path add to allure
  • Exporters benefit from higher prices for oil, iron ore, milk

Currencies of commodity-exporting countries, including Norway and Australia, lead gains this quarter as speculation the Federal Reserve would be slow to raise U.S. interest rates emboldened investors to pour money into higher-yielding assets.

The Norwegian krone, Australian and New Zealand dollars outperformed their developed-market peers as prices of natural-resources such as oil, iron ore and milk recovered. Traders have reduced wagers for further easing by the Australian and New Zealand central banks, while Norges Bank signaled this month it’s done with easing rates. Bloomberg’s gauge of the greenback is little changed during the past three months, with the market-implied odds of a U.S. interest-rate increase by year-end barely better than a coin toss.

“The U.S. dollar overall will struggle to head significantly higher,” said Elias Haddad, a senior currency strategist at Commonwealth Bank of Australia in Sydney. The Aussie and kiwi strengthened this quarter as “the probability of more rate cuts has diminished lately,” while Norway’s central bank has become “less dovish,” he said.

Oil Rebound

The krone gained 0.7 percent to 7.9902 versus the greenback at 9:26 a.m. in New York, having surged 4.5 percent since June 30. Norway is western Europe’s largest oil producer. Brent crude traded near a three-week high after the surprise decision by the Organization of Petroleum Exporting Countries this week to trim output for the first time in eight years.

The Aussie has advanced 2.7 percent since June 30 as iron-ore prices strengthened for a third quarter. The kiwi has appreciated 2.1 percent in the past three months as milk prices jumped more than 30 percent.

Swaps traders are pricing in about 47 percent odds of a rate reduction by the Reserve Bank of Australia in March, compared with 55 percent in early September. The chance of a rate cut by the Reserve Bank of New Zealand in November is 79 percent, while the likelihood of further easing by February is 29 percent.

Reports that some Deutsche Bank AG clients are paring back their exposure to the beleaguered German lender damped investors’ risk appetite Friday, weighing on higher-yielding assets including the Aussie and kiwi. The Australian currency slipped 0.2 percent to 76.24 U.S. cents Friday, while New Zealand’s dollar fell as much as 0.3 percent before advancing 0.2 percent at 72.69 U.S. cents.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, was little changed Friday.

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