Friday, 12 October 2012

Aussie Trades Near One-Week High on Commodity Price Gains

By Kristine Aquino - Oct 12, 2012 9:59 AM GMT+0400

Australia’s dollar rose, trading 0.2 percent from its highest level in more than a week as gains in commodity prices boosted demand for the currency.
The so-called Aussie strengthened versus most of its 16 major counterparts this week after prices for iron ore, Australia’s top export, climbed to the most in more than two months. A report yesterday showed claims for jobless benefits in the U.S. fell to the least since February 2008, buoying risk appetite. Data today may show confidence in the world’s biggest economy stayed near the strongest level since May. New Zealand’s dollar, nicknamed the kiwi, rose as Asian stocks advanced.
“Iron ore prices have improved,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “The labor market may be picking up a touch in the U.S. It’s positive for the Aussie and it’s positive for risk.”
The Australian dollar added 0.1 percent to $1.0277 as of 4:49 p.m. in Sydney from $1.0264 yesterday, when it reached $1.0294, the highest since Oct. 2. It has climbed 0.9 percent this week. New Zealand’s currency strengthened 0.2 percent to 81.91 U.S. cents and is poised for a 0.2 percent weekly advance.
Australia’s 10-year bond yield was little changed at 3.04 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.615 percent, two basis points below last week’s close.
The MSCI Asia Pacific Index of shares added 0.5 percent.

Commodities Rally

The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials rose 0.6 percent yesterday. Physical iron ore with 62 percent content at the Chinese port of Tianjin advanced to $117.70 a ton on Oct. 10, the highest close since July 25, according to The Steel Index Ltd. China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.
The New Zealand dollar is the best performing currency this year among the 10 tracked by Bloomberg Correlation-Weighted Indexes, having risen 3.7 percent. The Australian dollar has fallen 1.5 percent over the same period, and has tumbled 2.9 percent in the past three months.
Further declines in the Australian dollar may be curbed as the scale of central bank rate cuts priced in by traders of overnight index swaps is now in “overshoot territory,” according to Royal Bank of Canada.
“With so much negative news already in the price, we see downside in the Australian dollar limited from current levels,” Sue Trinh, a Hong Kong-based senior currency strategist at RBC, wrote in a report today.

Rate Cuts

Swaps data compiled by Bloomberg show traders see a 80 percent chance Governor Glenn Stevens will lower the Reserve Bank of Australia’s overnight cash-rate target to a record 2.75 percent or lower as early as February. This comes after officials cut the rate by a quarter-percentage point to 3.25 percent at the RBA’s most recent meeting on Oct. 2.
The Thomson Reuters/University of Michigan sentiment index, a gauge of confidence among U.S. consumers, was probably at 78 this month, according to the median estimate of economists surveyed by Bloomberg News before preliminary figures are released today. That compares with a reading of 78.3 in September, the highest since May.
To contact the reporter on this story: Kristine Aquino in Singapore at
To contact the editor responsible for this story: Rocky Swift at