Wednesday, March 21, 2012

Aussie, N.Z. Dollars Gain on Optimism Europe Risks Fading

The Australian and New Zealand dollars rallied from yesterday’s decline on speculation risks from Europe’s sovereign-debt crisis are receding, boosting demand for higher-yielding assets.
    The so-called Aussie snapped its biggest one-day drop this year after Greek Prime Minister Lucas Papademos won parliamentary approval for a new 130 billion-euro ($172.5 billion) international bailout. Federal Reserve Chairman Ben S. Bernanke will tell Congress today that financial strains in the 17-nation region have eased, according to prepared testimony. Gains in New Zealand’s dollar were tempered as whole-milk powder prices fell for a seventh-straight auction.
   “We’ve been seeing risk assets globally performing well on the back of the more favorable environment in Europe,” said Tim Riddell, head of global markets research in Singapore at Australia & New Zealand Banking Group Ltd. (ANZ) “Our medium-term fundamental forecast is the Aussie will stay solidly bid.”
    Australia’s currency gained 0.2 percent to $1.0495 as of 5:25 p.m. in Sydney after declining 1.2 percent yesterday, the sharpest slide since Dec. 12. The Aussie added 0.2 percent to 87.87 yen after dropping 0.8 percent yesterday, the most since March 12. New Zealand’s dollar rose 0.3 percent to 81.92 U.S. cents and advanced 0.3 percent to 68.58 yen.
Greek Approval
    A total of 213 Greek lawmakers voted today in favor of the legislation to secure aid for the country and 79 against, Acting Parliament Speaker Grigoris Niotis said in remarks carried live on state-run Vouli TV.
    Greece pushed through the biggest sovereign restructuring in history earlier this month after getting private investors to forgive more than 100 billion euros of debt, opening the way for the second bailout.
   “The recent reduction in financial stresses in Europe is a welcome development for the United States,” Fed Chairman Bernanke said in the text of testimony to be delivered today to the House Committee on Oversight and Government Reform.
    Australia’s currency weakened yesterday on concern an economic slowdown in China, the nation’s biggest trading partner, would damp demand for its commodity exports.
    Steel output growth in China has slowed as it puts greater focus on consumers rather than building projects, BHP Billiton Ltd. (BHP), the world’s biggest mining company, said yesterday.
    Earnings from Australia’s minerals and energy exports may total A$199.2 billion ($209 billion) in the year ending June 30, the Bureau of Resources and Energy Economics said in a report today. That compares with a December forecast of a record A$205.8 billion, and A$179.2 billion a year earlier.
Worst Performers
   The Aussie has lost 1.2 percent in the past month and the kiwi has declined 1.4 percent, making them the two worst performers after the yen among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
   Demand for the New Zealand dollar was limited after Fonterra Cooperative Group Ltd (FCG)., the world’s largest dairy exporter, said milk powder for May delivery dropped to $3,316 a metric ton, the lowest since Oct. 5.
   “There’s a very strong correlation between the prices that are fixed in the auction to the kiwi dollar,” said Jeremy Jukes, a foreign-exchange dealer in Auckland at Velocity Trade Ltd., referring to Fonterra’s sale. A drop in milk prices “has certainly weighed down on the kiwi.”
   Fonterra, which accounts for about 40 percent of the global trade in dairy products, last week cut its forecast payment to New Zealand farmers by 2.3 percent. Increased supply of milk products and concern that weaker economic growth will curb demand is bringing down prices, Chief Executive Officer Theo Spierings said.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, gained two basis points, or 0.02 percentage point, to 3.13 percent.

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