Wednesday, February 4, 2009

N.Z. Dollar Gains After Jobless Data; Australian Dollar Rises

By Candice Zachariahs

Feb. 5 (Bloomberg) -- The New Zealand dollar rose for a third day after the government reported jobless data that was better than some economists were expecting. The Australian currency also advanced.

Australia’s dollar approached a one-week high after a measure of shipping costs for commodities capped its longest stretch of gains since September 2007, signaling demand for raw materials may be recovering. New Zealand’s unemployment rate increased to 4.6 percent, Statistics New Zealand said today. Three economists surveyed by Bloomberg News before the release predicted it would climb as high as 4.7 percent.

“The New Zealand dollar popped because the number wasn’t as bad as people thought it might be,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s biggest bank by market value. “Our view is that the central bank will cut 50 basis points at their March meeting” to help spur growth in the economy.

New Zealand’s dollar advanced to 51.12 U.S. cents as of 3:48 p.m. in Wellington, from 50.68 cents before the data was released and 50.69 late in Asia yesterday. It climbed to 45.66 yen from 45.12. The currency may rise as high as 51.50 cents today, Speizer said.

Australia’s dollar gained 0.3 percent to 64.28 U.S. cents and rose 0.7 percent to 57.41 yen.

Australia’s currency rallied as the Baltic Dry Index gained for an 11th day to 1148 points yesterday, signaling there may be higher demand for raw materials the nation exports. The index fell as low as 663 points on Dec. 5, the least since 1986.


Commodities are important to the so-called Aussie dollar as raw materials account for 60 percent of the nation’s exports. Sales of commodities including lumber make up 70 percent of New Zealand’s overseas shipments.

The New Zealand dollar has been the worst performer of the 16 major currencies in the past three months, according to Bloomberg data. It has lost 23 percent versus the yen and 15 percent against the greenback as Standard and Poor’s revised the outlook on the nation’s foreign-currency credit rating to negative from stable last month, citing concern the current- account deficit and overseas debt will curb growth. Australia’s dollar has fallen 7 percent versus the greenback and 14 percent versus the yen in the same period.

New Zealand’s currency may weaken to an all-time low of 38.98 cents in coming months as a global slowdown reduces demand for the nation’s riskier assets, RBC Capital Markets, a unit of Royal Bank of Canada, forecast in a report on Feb. 2.

Rate Cuts

Reserve Bank of New Zealand Governor Alan Bollard has cut the official cash rate by 4.75 percentage points since July to 3.5 percent, the lowest ever, and said there is room for further reductions to steer the economy out of a recession. Traders are betting borrowing costs will fall to 2.7 percent in the next 12 months, according to a Credit Suisse Group AG index based on swaps trading.

Higher interest rates in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attract investors to the South Pacific nations’ assets. Australia’s central bank cut rates by 1 percentage point to 3.25 percent on Feb. 3.

New Zealand’s AAA foreign-currency credit rating is safe for now, according to an analyst at Moody’s Investors Service. The nation has large external liabilities mainly on bank borrowings, said Stephen Hess, a credit analyst at Moody’s, according to a Reuters report.

BHP Billiton

The Australian dollar also advanced as BHP Billiton Ltd., the world’s third-largest producer of iron ore, said yesterday that stockpiles of the raw material used to make steel have been trimmed in China and customers are returning to the market.

“The Baltic Dry Index had a good day and reports of Chinese stock piles decreasing also supported the Aussie,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. It’s likely to trade between 63.60 and 65.40 U.S. cents today, he said.

Gains in the Australian dollar will be limited until the Senate passes the government’s A$42 billion stimulus package announced Feb. 3, John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a research note. The package is likely to be debated and voted on in the upper house Senate next week, Greens Senator Bob Brown said in an interview.

The currency will face so-called resistance at 65.30 to 65.50 U.S. cents, Kyriakopoulos said.

Australian government bonds fell for a third day, pushing the yield on the 10-year note up two basis points, or 0.02 percentage point, to 4.33 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.171, or A$1.71 per A$1,000 face amount, to 107.453.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.39 percent from 3.36 yesterday.

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