The New Zealand dollar rose to a two-week high after Federal Reserve Bank of Chicago President Charles Evans said easier monetary policy is needed to support global growth.
The so-called kiwi appreciated against 15 of its 16 major counterparts as Asian stocks advanced, boosting the allure of higher-yielding currencies. The Australian dollar pared an earlier gain after a private report showed China’s manufacturing may contract at a faster pace this month, fanning concern that demand for commodity exports will decrease.
“The Australian and New Zealand dollars are being bought because of speculation of additional monetary easing in the U.S.,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “These currencies are preferred investment destinations on the back of a potential flood of greenbacks.”
The New Zealand dollar touched 81.87 U.S. cents, the highest since Aug. 7, before trading at 81.66, as of 4:26 p.m. in Sydney, 0.3 percent stronger than the close in New York yesterday. Australia’s currency rose 0.1 percent to $1.0511 after earlier climbing as high as $1.0545. The so-called Aussie traded at 82.49 yen from 82.55, while the kiwi advanced 0.2 percent to 64.09 yen.
“I don’t need to see any more data to know that I think we should have more accommodation,” Evans told reporters today in Beijing, referring to the U.S.
Fed Minutes
His comments came after the minutes of the Fed’s July 31- Aug. 1 meeting released yesterday said “many members judged that additional monetary accommodation would likely be warranted fairly soon” unless there is a substantial and sustainable improvement in the economy. Central bank officials next meet on Sept. 12-13.Ten-year Treasury yields fell 11 basis points yesterday, the most since May 30, to 1.69 percent.
The rate on similar-maturity government debt in Australia dropped nine basis points to 3.29 percent today. The MSCI Asia Pacific Index (MXAP) of shares advanced 1 percent, boosting demand for higher-yielding currencies.
A purchasing managers’ index for China’s manufacturing was at 47.8 in August on a preliminary basis, a report from HSBC Holdings Plc and Markit Economics showed today. If confirmed, it would be the lowest since November and extend to 10 months the longest run of readings below the expansion-contraction dividing line of 50 in the index’s eight-year history.
China’s Manufacturing
“The Aussie came under pressure after the weaker number,” said Roy Teo, a currency strategist in Singapore at ABN Amro Private Bank, referring to the Chinese manufacturing report. Deteriorating economic figures will “increase speculation of further pressure on Chinese authorities to ease monetary policy.”China’s central bank governor Zhou Xiaochuan yesterday said further interest-rate adjustments can’t be ruled out. The country is Australia’s largest trading partner and New Zealand’s second-biggest export destination.
The Aussie declined to as low as NZ$1.2858 today, the weakest since Aug. 8. Minutes of the Reserve Bank of Australia’s Aug. 7 meeting said on Aug. 21 that the nation’s currency “had remained at a relatively high level, notwithstanding the weakening in the global outlook and decline in many commodity prices.”
The minutes suggest “the RBA could potentially ease rates further” if persistent Aussie strength hurts the economy, said ABN Amro’s Teo. “Market participants are hesitant to add long positions in the Aussie.”
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