N.Z. Dollar Rises on Exports; Australia’s on Yuan Revaluation
By Candice Zachariahs
March 26 (Bloomberg) -- The New Zealand dollar gained for a second day as the nation’s trade surplus widened in February after commodity prices rose and China overtook the U.S. as its second-largest export market.
Australia’s currency advanced on speculation China may allow a revaluation of the yuan, helping to curb rising price pressures and ensure long-term growth. The so-called kiwi is set to advance for a fourth week versus the yen as Asian stocks rose and a report yesterday showed gross domestic product grew at the fastest pace in two years in the fourth quarter of 2009.
“Looking ahead we can see further improvements in New Zealand’s exports because of higher commodity prices,” said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. “China is going to have an inflation problem on their hands, the sooner they address it the greater confidence we can have that growth will be sustainable. That’s positive for the Aussie.”
New Zealand’s dollar climbed 0.4 percent to 70.62 U.S. cents as of 4:13 p.m. in Sydney from 70.36 cents yesterday in New York. It was at 65.40 yen from 65.26 yen.
Australia’s currency rose 0.3 percent to 90.98 U.S. cents after earlier touching 90.63 cents, its weakest since March 9. The currency added 0.1 percent to 84.23 yen.
New Zealand’s dollar has risen 1.2 percent against the dollar this month and gained 5.3 percent against the yen. The Aussie has strengthened 1.6 percent and 5.8 percent, respectively.
China overtook the U.S. as New Zealand’s second-largest export market last month on increased demand for milk powder, wood and wool, the statistics bureau said today. Shipments to China surged 37 percent to NZ$3.76 billion ($2.6 billion) in the year ended Feb. 28. Australia is New Zealand’s biggest market.
N.Z. Trade
New Zealand’s trade surplus increased to NZ$321 million in February, Statistics New Zealand said, with exports rising 5.3 percent from January to NZ$3.32 billion.
China may resume a “managed float” of the yuan, while avoiding an abrupt revaluation that would wreck its exports, Fan Gang, an adviser to the country’s central bank, wrote in a opinion piece published today in the China Daily and the Melbourne-based Age. China buys about a fifth of Australia’s exports, led by iron ore and coal, and is the country’s largest trading partner.
“The last thing we want is for China to overheat and have a massive slowdown,” Goh said. “We see any Chinese move as positive over the medium to longer term.”
Benchmark interest rates are 2.5 percent in New Zealand and 4 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Low ‘Momentum’
Australia’s currency is still headed for its first weekly decline this month versus the greenback with Asian stocks set to end four weeks of gains and the Reuters/Jefferies CRB Index of 19 raw materials dropping for a third straight week.
“Equity markets seem to be running out of momentum to the topside and the commodity index is struggling to break higher,” said Derek Mumford, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “We’re nervous that we could see the Aussie sub-90 over the next week or two.”
The Aussie will find support toward 89.80 cents and New Zealand’s currency will find buyers near 69.70 cents, he said.
Fiscal Difficulties
The world’s largest economies, including the U.S., U.K. and Europe, face “difficult fiscal decisions” in coming years to curb debt levels, Australian central bank Governor Glenn Stevens said in Sydney today. Without a “credible path to fiscal sustainability” economic growth “could easily be stunted by rising risk premia built into interest rates as markets worry about long-run solvency.”.
Australian government bonds rose. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 5.74 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.11, or A$1.10 per A$1,000 face amount, to 90.63.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.28 percent from 4.33 yesterday.
By Candice Zachariahs
March 26 (Bloomberg) -- The New Zealand dollar gained for a second day as the nation’s trade surplus widened in February after commodity prices rose and China overtook the U.S. as its second-largest export market.
Australia’s currency advanced on speculation China may allow a revaluation of the yuan, helping to curb rising price pressures and ensure long-term growth. The so-called kiwi is set to advance for a fourth week versus the yen as Asian stocks rose and a report yesterday showed gross domestic product grew at the fastest pace in two years in the fourth quarter of 2009.
“Looking ahead we can see further improvements in New Zealand’s exports because of higher commodity prices,” said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. “China is going to have an inflation problem on their hands, the sooner they address it the greater confidence we can have that growth will be sustainable. That’s positive for the Aussie.”
New Zealand’s dollar climbed 0.4 percent to 70.62 U.S. cents as of 4:13 p.m. in Sydney from 70.36 cents yesterday in New York. It was at 65.40 yen from 65.26 yen.
Australia’s currency rose 0.3 percent to 90.98 U.S. cents after earlier touching 90.63 cents, its weakest since March 9. The currency added 0.1 percent to 84.23 yen.
New Zealand’s dollar has risen 1.2 percent against the dollar this month and gained 5.3 percent against the yen. The Aussie has strengthened 1.6 percent and 5.8 percent, respectively.
China overtook the U.S. as New Zealand’s second-largest export market last month on increased demand for milk powder, wood and wool, the statistics bureau said today. Shipments to China surged 37 percent to NZ$3.76 billion ($2.6 billion) in the year ended Feb. 28. Australia is New Zealand’s biggest market.
N.Z. Trade
New Zealand’s trade surplus increased to NZ$321 million in February, Statistics New Zealand said, with exports rising 5.3 percent from January to NZ$3.32 billion.
China may resume a “managed float” of the yuan, while avoiding an abrupt revaluation that would wreck its exports, Fan Gang, an adviser to the country’s central bank, wrote in a opinion piece published today in the China Daily and the Melbourne-based Age. China buys about a fifth of Australia’s exports, led by iron ore and coal, and is the country’s largest trading partner.
“The last thing we want is for China to overheat and have a massive slowdown,” Goh said. “We see any Chinese move as positive over the medium to longer term.”
Benchmark interest rates are 2.5 percent in New Zealand and 4 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
Low ‘Momentum’
Australia’s currency is still headed for its first weekly decline this month versus the greenback with Asian stocks set to end four weeks of gains and the Reuters/Jefferies CRB Index of 19 raw materials dropping for a third straight week.
“Equity markets seem to be running out of momentum to the topside and the commodity index is struggling to break higher,” said Derek Mumford, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “We’re nervous that we could see the Aussie sub-90 over the next week or two.”
The Aussie will find support toward 89.80 cents and New Zealand’s currency will find buyers near 69.70 cents, he said.
Fiscal Difficulties
The world’s largest economies, including the U.S., U.K. and Europe, face “difficult fiscal decisions” in coming years to curb debt levels, Australian central bank Governor Glenn Stevens said in Sydney today. Without a “credible path to fiscal sustainability” economic growth “could easily be stunted by rising risk premia built into interest rates as markets worry about long-run solvency.”.
Australian government bonds rose. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 5.74 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.11, or A$1.10 per A$1,000 face amount, to 90.63.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.28 percent from 4.33 yesterday.