N.Z. Dollar Gains as Bollard Raises Rates; Aussie Rises on Jobs
By Yoshiaki Nohara and Candice Zachariahs
June 10 (Bloomberg) -- New Zealand’s dollar rose after the central bank raised interest rates for this first time in three years. Its Australian counterpart gained on better-than-forecast jobs data.
The so-called kiwi ended three days of losses versus the Australian dollar on expectations Reserve Bank of New Zealand Governor Alan Bollard will boost borrowing costs at a faster pace than Australian policy makers. The South Pacific currencies were the biggest gainers among their major peers.
“We’re embarking on a process where rates will be gradually increased back toward neutral” in New Zealand, said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “We’re going to see support for the currency from a widening yield advantage in New Zealand and that will help offset some of the effects from lower risk appetite in a global sense.”
New Zealand’s currency rose to 67.36 U.S. cents as of 2:27 p.m. in Wellington from 66.71 cents yesterday in New York. The currency advanced 0.9 percent to 61.43 yen, and gained 0.4 percent to NZ$1.2361 against the Australian dollar.
The so-called Aussie advanced 0.6 percent to 83.30 U.S. cents and 0.5 percent to 75.98 yen.
“Underlying inflationary pressures are expected to increase,” Bollard said in a statement released in Wellington after increasing the official cash rate to 2.75 percent from a record-low 2.5 percent. “Given the current low level of the cash rate, it is therefore appropriate to gradually remove policy stimulus.”
Carry Trades
Benchmark interest rates in New Zealand and Australia, which has a key rate of 4.5 percent, offer a premium over the 0.1 percent level in Japan and the U.S. gauge of as low as zero, boosting demand for so-called carry trades. In such trades, investors get funds in a country with relatively low borrowing costs and invest in another nation with higher interest rates.
Swaps traders are betting the RBNZ will increase the key rate by 1.39 percentage points over 12 months, while the Reserve Bank of Australia will raise its target rate by 17 basis points, according to Credit Suisse AG indexes.
Australia’s payrolls rose by 26,900 and the jobless rate fell to 5.2 percent in May, the statistics bureau reported today. Economists surveyed by Bloomberg News predicted a 20,000 increase and a 5.4 percent jobless rate.
China’s Exports
China’s exports increased 49 percent and imports rose 48 percent in May from a year earlier, the government said today.
The New Zealand dollar “has been supported obviously by the first rate hike in a few years,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. “The RBNZ has found the economy strong enough to start a tightening cycle and you’ve also had the Chinese exports, a couple of positives for the Aussie dollar.”
China is Australia’s largest trading partner and New Zealand’s second-biggest export market.
Demand for the Australian dollar was limited as the China Iron & Steel Association said Chinese steelmakers, the largest in the world, may delay accepting higher contract iron ore prices after steel prices fell and the European crisis worsened.
“The outlook for the European market is unclear and steel prices may keep falling,” Shan Shanghua, general secretary of the association, said in an interview with Bloomberg News. “I dare say right now no Chinese steelmakers would accept the third-quarter prices asked” by Vale SA, Rio Tinto Group and BHP Billiton Ltd., he said.
Australian government bonds fell. The yield on the 4.5 percent note maturing in April 2020 rose four basis points to 5.35 percent, according to Bloomberg data. New Zealand’s two- year swap rate, a fixed payment made to receive floating rates, fell to 4.29 percent from 4.30 percent.
http://www.bloomberg.com/apps/news?p...T3TrGjKM&pos=6
By Yoshiaki Nohara and Candice Zachariahs
June 10 (Bloomberg) -- New Zealand’s dollar rose after the central bank raised interest rates for this first time in three years. Its Australian counterpart gained on better-than-forecast jobs data.
The so-called kiwi ended three days of losses versus the Australian dollar on expectations Reserve Bank of New Zealand Governor Alan Bollard will boost borrowing costs at a faster pace than Australian policy makers. The South Pacific currencies were the biggest gainers among their major peers.
“We’re embarking on a process where rates will be gradually increased back toward neutral” in New Zealand, said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “We’re going to see support for the currency from a widening yield advantage in New Zealand and that will help offset some of the effects from lower risk appetite in a global sense.”
New Zealand’s currency rose to 67.36 U.S. cents as of 2:27 p.m. in Wellington from 66.71 cents yesterday in New York. The currency advanced 0.9 percent to 61.43 yen, and gained 0.4 percent to NZ$1.2361 against the Australian dollar.
The so-called Aussie advanced 0.6 percent to 83.30 U.S. cents and 0.5 percent to 75.98 yen.
“Underlying inflationary pressures are expected to increase,” Bollard said in a statement released in Wellington after increasing the official cash rate to 2.75 percent from a record-low 2.5 percent. “Given the current low level of the cash rate, it is therefore appropriate to gradually remove policy stimulus.”
Carry Trades
Benchmark interest rates in New Zealand and Australia, which has a key rate of 4.5 percent, offer a premium over the 0.1 percent level in Japan and the U.S. gauge of as low as zero, boosting demand for so-called carry trades. In such trades, investors get funds in a country with relatively low borrowing costs and invest in another nation with higher interest rates.
Swaps traders are betting the RBNZ will increase the key rate by 1.39 percentage points over 12 months, while the Reserve Bank of Australia will raise its target rate by 17 basis points, according to Credit Suisse AG indexes.
Australia’s payrolls rose by 26,900 and the jobless rate fell to 5.2 percent in May, the statistics bureau reported today. Economists surveyed by Bloomberg News predicted a 20,000 increase and a 5.4 percent jobless rate.
China’s Exports
China’s exports increased 49 percent and imports rose 48 percent in May from a year earlier, the government said today.
The New Zealand dollar “has been supported obviously by the first rate hike in a few years,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. “The RBNZ has found the economy strong enough to start a tightening cycle and you’ve also had the Chinese exports, a couple of positives for the Aussie dollar.”
China is Australia’s largest trading partner and New Zealand’s second-biggest export market.
Demand for the Australian dollar was limited as the China Iron & Steel Association said Chinese steelmakers, the largest in the world, may delay accepting higher contract iron ore prices after steel prices fell and the European crisis worsened.
“The outlook for the European market is unclear and steel prices may keep falling,” Shan Shanghua, general secretary of the association, said in an interview with Bloomberg News. “I dare say right now no Chinese steelmakers would accept the third-quarter prices asked” by Vale SA, Rio Tinto Group and BHP Billiton Ltd., he said.
Australian government bonds fell. The yield on the 4.5 percent note maturing in April 2020 rose four basis points to 5.35 percent, according to Bloomberg data. New Zealand’s two- year swap rate, a fixed payment made to receive floating rates, fell to 4.29 percent from 4.30 percent.
http://www.bloomberg.com/apps/news?p...T3TrGjKM&pos=6
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