AUD 01 (May 08 - Feb 12)

[winston]

Australian Dollars
Commentary by Michael R. Sesit

May 31 (Bloomberg) -- Need a weather vane for the global economy? Try Australia, or more specifically the Aussie dollar, as the country's currency is colloquially known.

Like the U.S., Australian economic growth is slated to slow. Like the euro area, the country is wrestling with accelerating inflation. Like the U.K., Australia has a high level of house- ownership, suggesting that consumption will slow as real-estate prices fall. Like emerging Asia, Australia's economy is hinged to China's explosive growth. And like Saudi Arabia and other resource-rich nations, raw-material exports are buoyant.

The Australian dollar has gained 9.1 percent against the U.S. dollar this year, and has doubled in value since April 2001. On May 22, it climbed to a 25-year high of 96.54 U.S. cents.

``There has been a significant move in the value of the Australian dollar on currency markets, driven in part by the resources boom and demand for Australian commodities,'' Prime Minister Kevin Rudd, who is 50, said on May 28. ``I seem to remember as a kid growing up when the Australian dollar was worth more than the U.S. dollar, but it has been a long, long time.''

Whether the A-dollar regains parity with the greenback -- as some, but by no means all, forecasters predict -- depends on the relative level of Australian interest rates, the country's growth rate, global commodity prices and the health of Australia's domestic economy.

In addition to booming prices for industrial and precious metals and agricultural products, the Australian dollar is bolstered by interest rates that stand at a 12-year high of 7.25 percent. That compares with 0.5 percent in Japan, 2 percent in the U.S., 4 percent in the euro area and 5 percent in the U.K.

Rate Increase

What's more, the Reserve Bank of Australia's board spent ``considerable time'' discussing a possible further increase in borrowing costs to stem inflation that in the first quarter was at a seven-year high of 4.2 percent, according to minutes of its May 6 meeting.

Even so, the currency faces plenty of obstacles. The Australian index of leading economic indicators slowed in March for the fourth consecutive month. Although consumer confidence picked up in May on announcements of tax cuts, it remains near 15-year lows. Building approvals fell 5.7 percent in March from February. New-car sales in April were down 5.9 percent from December.

The country's economy, in its 17th year of expansion, will grow 2.75 percent in the year ending June 30, 2009, slowing from 3.5 percent this fiscal year, according to the budget submitted May 13 by Treasurer Wayne Swan.

If the Aussie does climb to parity with its U.S. counterpart, it may make some Australians proud and help Rudd remember his youth.

Yet the reasons behind the currency's strength won't be welcome news for the rest of the world.

[Blackjack]

Australian Dollar Rises After Job Growth Exceeds Expectations

By Ron Harui and Candice Zachariahs

July 10 (Bloomberg) -- The Australian dollar rose after a government report showed jobs rebounded by more than economists predicted in June. The New Zealand dollar gained as the nation's interest-rate advantage over the U.S. attracted investors.

Australia's dollar climbed the most in almost two months as the report indicated the economy may be resilient to the Reserve Bank of Australia's 12-year-high benchmark rate of 7.25 percent. New Zealand's dollar advanced for a second day as the difference in yield between 10-year New Zealand and U.S. government bonds remained near the highest in more than one month.

``The Australian dollar is being bought as the employment figures were good,'' said Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo. ``We maintain our forecast that the RBA will raise rates in November, pushing up the Australian dollar to 99 U.S. cents by year-end.''

The Australian dollar rose 1 percent, the most since May 16, to 96.13 U.S. cents at 4:35 p.m. in Sydney, from 95.55 cents before the report and from 95.17 cents late in Asia yesterday. The currency climbed to 102.66 yen from 102.19 yen.

The New Zealand dollar gained 0.5 percent to 75.79 U.S. cents from 75.41 U.S. cents late in Asia yesterday. It earlier reached 76.21 cents, the strongest since July 2. The currency bought 80.95 yen, compared with 80.99 yen yesterday.

Australia's currency ended four days of losses versus the U.S. dollar as the number of people employed rose 29,800 last month after a 19,700 drop in May, the statistics bureau said in Sydney today. The median estimate of 25 economists surveyed by Bloomberg News was for a 10,000 increase.

The U.S. dollar fell against the Australian and New Zealand currencies as traders increased bets the U.S. Federal Reserve will keep interest rates on hold through 2008, boosting the appeal of higher-yielding assets.

Demand for Commodities

Demand for commodities from emerging markets including China and India boosted Australian exports to a record in May, helping to offset falling consumer spending and business confidence. Prior to the jobs decline in May, Australian employers had added workers every month from October 2006, the longest run of gains since the government began publishing monthly figures in 1978.

``The Australian economy is in very strong shape in large part because of the global commodity boom,'' said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation's largest lender. ``That's feeding through to a strong Australian dollar, lots of spending and that means more employment.''

The Australian dollar fell to a three-week low yesterday as traders reduced bets the central bank will raise borrowing costs after a government report showed home-loan approvals slid by the most in eight years and a private-sector survey of consumer confidence dropped to the lowest since 1992.

`Wide Rate Spreads'

New Zealand's currency climbed to a one-week high against the U.S. dollar as the yield advantage on 10-year New Zealand government bonds over similar-maturity Treasuries was 2.36 percentage points, near yesterday's spread of 2.43 points, which was the widest since June 6.

``New Zealand still has fairly wide rate spreads,'' said David Watt, a senior currency strategist in Toronto at RBC Capital Markets, a unit of Canada's largest bank. ``Some people are nibbling at the margins.''

Benchmark interest rates are 8.25 percent in New Zealand and 7.25 percent in Australia, compared with 2 percent in the U.S. and 0.5 percent in Japan, making them popular destinations for international investors seeking higher returns.

Australian government debt rose. The yield on the 10-year note fell 5 basis points, or 0.05 percentage point, to 6.29 percent. The price of the 5.25 percent bond maturing in March 2019 increased 0.330, or A$3.30 per A$1,000 face amount, to 91.975. Bond yields move inversely to price.

New Zealand 10-year government bonds gained for a sixth day. The yield on the 10-year note dropped 6 basis points to 6.18 percent. A basis point is equivalent to 0.01 percentage point.

[kennynah]

blackjack:
thanks for this contribution

welcome to Huatopedia, where everyday is a HUat Huat day !!!

[winston]

Financial Times: Commodity currencies coming under pressure

“Commodity currencies such as the Australian and New Zealand dollars are coming under pressure, despite weathering the early stages of the global slowdown and credit crunch extremely well, says Hans Redeker, global head of FX strategy at BNP Paribas.

“He notes that the Reserve Bank of Australia has acknowledged that the country’s economy is feeling the negative effects of the global credit crunch and that a recent NZ Treasury report suggests that the New Zealand economy is already in a recession.

“‘Hence, we believe that the interest rate cycles in NZ and Australia have now peaked,’ Mr Redeker says.

“But he also points out that it has been the international investment environment that has been the main driving force for the Australian and NZ dollars over the past few years, and that this is also deteriorating.

“‘Hopes of an emerging market decoupling have evaporated, with fears of stagflation now gripping the Asian regional markets,’ Mr Redeker says. ‘Moreover, the fears of a global slowdown are also starting to have an impact on commodity prices – with the current exception of oil.

“There are clear signs that the major Australian dollar/US dollar uptrend is running out of steam. It is also interesting to note that there has been a sharp scaling back of speculative Australian dollar long positions from their recent peak over the course of the past few weeks, according to the CFTC position data.”

Source: Hans Redeker, BNP Paribas (via Financial Times), July 9, 2008.

[Blackjack]

Japan's Investors May Buy Australian, N.Z. Dollars, RBS Says

By Ron Harui

July 15 (Bloomberg) -- Japanese individual investors may keep buying the Australian and New Zealand dollars because of the South Pacific nations' interest-rate advantage over Japan, according to Royal Bank of Scotland Group Plc.

Housewives, pensioners, and businessmen boosted purchases of New Zealand's dollar, known as the kiwi, to a record last week as gains in Japan's currency provided them with an opportunity to buy higher-yielding assets at cheaper levels, according to data from the Tokyo Financial Exchange. The yen sales came even as concerns increased that New Zealand's economy may have slipped into a recession.

``Mrs. Watanabe likes kiwi,'' said Masafumi Yamamoto, head of foreign-exchange strategy in Tokyo at Royal Bank of Scotland, the fourth-largest currency trader, in a research note dated yesterday. ``Japanese retail investors don't care yet about the economic slowdown becoming evident in Australia and New Zealand and are likely to continue buying the high-yielding currencies as long as the yield gap remains.''

Investors increased net long positions on New Zealand's currency against the yen to an all-time high of 150,829 contracts on July 8 and on Australia's dollar to a record 79,920 on July 1, according to Tokyo Financial Exchange data. A long position is a bet on an asset price's gain.

The New Zealand dollar traded at 81.09 yen as of 3 p.m. in Tokyo from 81.21 yen late in Asia yesterday. The Australian dollar bought 103.18 yen, compared with 103.31 yen.

The Australian and New Zealand dollars are the best and third-best performers respectively, among the 16 most-active currencies versus the yen the past five days.

Rate Difference

The Bank of Japan kept its benchmark interest rate at 0.5 percent today while cutting its economic growth forecast. Benchmark interest rates are 8.25 percent in New Zealand and 7.25 percent in Australia, making the currencies of the nations favorites for so-called carry trades.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.

`Significant Headwind'

``The behavior of such investors, given the size of their asset holdings, is a potential significant headwind against Australian and New Zealand dollar weakness,'' said Yamamoto, who confirmed the details of the report.

So-called margin trading of currencies in Japan using borrowed funds rose 86 percent in the first quarter to a record 213 trillion yen ($2 billion), figures from the Financial Futures Association of Japan showed in May.

Japanese households have 1,490 trillion yen in financial assets, according to the Bank of Japan.

Australia's dollar, know as the Aussie, has climbed 10.6 percent and New Zealand's dollar advanced 2.3 percent the past three months on prospects that both countries will maintain their interest-rate advantage over Japan.

``Japanese households believe large yield gaps versus Japan will be maintained for the foreseeable future, despite monetary policy easing in Australia and New Zealand that we think is likely next year,'' Yamamoto said. ``They remain buyers on dips of Aussie-yen and kiwi-yen.''

Australian Finance Minister Lindsay Tanner said in a speech today at the Royal Melbourne Hospital that the economy faces ``uncertain times' because of the global credit slump, high inflation and record oil prices.

Heading for Recession

New Zealand's economy contracted 0.3 percent in the first quarter from the previous three months, a government report showed on June 27. Eight of 13 economists surveyed by Bloomberg say it also shrank in the second quarter, putting the economy in its first recession since 1998.

Traders are betting the Reserve Bank of Australia will cut its benchmark rate by 2 basis points, or 0.02 percentage point, in the next 12 months, according to a Credit Suisse Group index based on interest rate swaps. A similar index shows the Reserve Bank of New Zealand will lower its benchmark rate by 136 basis points, or 1.36 percentage points, in the next year.

[Blackjack]

Australian Dollar Falls After Stevens Says Inflation to Slow
By Ron Harui

July 16 (Bloomberg) -- The Australian dollar fell from a 25-year high after central bank Governor Glenn Stevens signaled interest rates may be high enough to keep inflation in check. The New Zealand dollar was little changed.

Australia's dollar snapped a four-day advance after Stevens told economists that the chances of ``keeping inflation low over the medium term are good,'' suggesting the RBA may have finished raising rates. New Zealand's dollar may end five days of gains as fewer consumers are borrowing to buy household appliances, homes and cars, adding to signs that economic growth is cooling

``Interest rates are at a peak is the bottom line of the speech,'' said Matthew Johnson, an economist at ICAP Australia Ltd. in Sydney. ``The Australian dollar might go down, and that's what we're seeing immediately.''

The Australian dollar declined to 97.68 U.S. cents at 4:40 p.m. in Sydney from 98.07 cents before the speech and an earlier high of 98.49 cents, the strongest since January 1983. The currency weakened to 101.86 yen from 102.88 yen.

The New Zealand dollar traded at 77.27 U.S. cents from 77.23 cents in Asia yesterday. It earlier reached 77.60 cents, the strongest since June 5. The currency, known as the kiwi, bought 80.58 yen from 80.85 yen.

The RBA's outlook on inflation ``does involve a period of significantly slower growth in demand in Australia,'' Stevens said in a speech in Sydney today. ``We still expect inflation to fall back to 3 percent by mid-2010, and to continue declining gradually thereafter.''

RBA Rate Bets

The benchmark interest rate is at a 12-year high of 7.25 percent in Australia and at a record 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the South Pacific nations a popular destination for international investors seeking higher returns.

Traders increased bets that the RBA will lower its benchmark rate after Steven's speech. A Credit Suisse Group index based on interest-rate swaps showed the central bank will cut borrowing costs by 14 basis points in the next 12 months, compared with 2 basis points yesterday. A basis point is 0.01 percentage point.

The New Zealand dollar may trim this month's 1.2 percent gain on speculation that its advance has been excessive because the nation's economy may be hurt by a global slowdown.

Applications for personal loans fell 16 percent in the six months ended June 30 from a year earlier, said Veda Advantage Ltd., Australia's biggest credit-checking company, in a statement e-mailed today to Bloomberg News.

`Aren't Completely Immune'

``The Australian and New Zealand economies aren't completely immune to a global slowdown,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``There's also sentiment that the currencies are overbought, so we may see them a bit lower.''

Technical charts that traders use to predict price movements signaled that gains in the New Zealand dollar were overdone.

The New Zealand dollar's 14-day stochastic oscillator was 88.19, according to data compiled by Bloomberg. A level above 80 suggests the currency has risen too fast.

Australian two-year government bonds gained, pushing the yield down 6 basis points, or 0.06 percentage points, to 6.55 percent. The price of the 5.25 percent bond due August 2010 rose 0.124, or A$1.24 per A$1,000 face amount, to 97.531.

New Zealand's government debt advanced. The yield on the 10-year note declined 3 basis points to 6.00 percent, and the three-year bond yield dropped 2 basis points to 6.07 percent. Yields move inversely to prices.

[mantra]

I've been riding the A$ rise for the last few years, topping up along the way, but today I sold the lot against SGD as there appears increasing anecdotal evidence its peaked and may indeed retrace 10-15% over the next 6-12 months.

A freind of mine recently went to Sydney and said the number of properties for sale has skyrocketed, while prices are moderating across the board. With interest rates at 9% there is quite a bit of pain being taken on the chin, and at some point that will show up in the numbers - bank writeoffs for starters. The RBA seems vigilant about inflation being tamed, so while the cylce may have peaked high rates for a while mean more pain and moderating growth. Against the SGD which is going for a tightening bias if inflation hits 8% and likely tightening in the US, then on a relative basis there are sufficient arguments that A$ may start to descent from its recent peak.

Just my personal views.

[kennynah]

Australian Dollar Plunges To New Multi-week Low Against US Currency
7/30/2008 1:24 AM ET



(RTTNews) - Wednesday morning in Asia, the Australian dollar slumped to a new multi-week low against the US currency after a report showed that approvals to build new homes in Australia unexpectedly declined in June on high interest rates and rising building costs.

The Australian Bureau of Statistics reported that construction approvals in June fell 0.7% from May, while economists were looking for an increase of 1%. Home approvals were down 7.8% in June from a year earlier. Most economists had been expecting an annual decline of 4.1%. The report also said that the monthly growth rate for May was revised downward to -7.2% and the full year figure for May was revised downward to -0.4%.

[winston]

Japan Individuals Buy Australian, New Zealand Dollars
By Kosuke Goto

July 31 (Bloomberg) -- Japanese individual investors bought record amounts of Australian and New Zealand dollars on the Tokyo Financial Exchange yesterday, as gains in the yen made the higher-yielding currencies cheaper.

Pensioners, housewives and businessmen also bought the southern hemisphere currencies after rising global equities improved their appetite for riskier investments. The Bank of Japan's target lending rate of 0.5 percent is the lowest among industrialized economies.

``Japan's absolute interest-rate disadvantage matters, prompting retail investors to buy high-yielding currencies on dips,'' said Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp., the second-largest U.S. lender. ``With the market turmoil calming down, Japanese individuals' risk appetite is improving.''

The difference in the number of wagers by Japanese individual investors on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- rose to 92,009 contracts yesterday, the most since July 2006 when Japan's largest financial futures market started collecting data.

Net-long positions on the New Zealand dollar against the yen reached a record 204,647 contracts. The contracts are denominated in 10,000 units of the foreign currency. Holdings of six major currencies, excluding the U.S. dollar, also reached an all-time high of 340,420 contracts.

The exchange's share of so-called margin trading, borrowing money to buy and sell currencies, was 8.6 percent in 2007 based on figures from the Financial Futures Association of Japan.

Yen Appreciation

The Australian dollar fell to a two-week low of 101.72 yen today after a government report showed retail sales dropped the most in six years, adding to signs the economy is slowing. It last traded at 101.88 yen as of 6:51 a.m. in London from 102.11 yen late yesterday in New York.

Against the New Zealand dollar, the yen climbed to 78.96 yesterday, the highest since May 12, as central bank Governor Alan Bollard said borrowing costs ``have room to fall.'' It traded at 79.15 today.

Japan's currency has appreciated 1.1 percent versus the Australian dollar and 0.8 percent against the New Zealand dollar in the past five days as funds reduced so-called carry trades.

In such trades, investors secure funds in countries with low borrowing costs, and buy assets in countries with higher rates, like Australia's 7.25 percent and New Zealand's 8 percent, earning the spread between the two. The risk is that currency moves erase those profits.

Rebuilding

Six months after correctly identifying the Australian dollar as one of the best bets in the foreign-exchange market, Daiwa Asset Management Co., the biggest investor in the nation's debt, last week predicted the rally is coming to an end.

Daiwa, which holds 4 percent of the government's bonds, expects the currency to close the year at $1, after earlier forecasting a surge to $1.10. Daiwa cut its estimate as the country's benchmark S&P/ASX 200 Index of stocks dropped to a 2 1/2-year low this month and the Reuters/Jefferies CRB Index of commodities fell 13 percent from its record high on July 2.

Japanese individuals tend to buy or sell whenever currencies threaten to break out of a range. Earlier this month, they reduced net long positions on the Australian dollar, as the currency reached the strongest in eight months against the yen on July 23. Those positions fell to 36,400 contracts on July 21, less than half a then record of 79,920 contracts on July 1. They have since rebuilt those bets on gains in the currency.

[Blackjack]

Any guesstimates for the support for Aud/Sgd?
____________________________________________________________________________________________

Australian Dollar Falls Below 90 U.S. Cents as Rate Cuts Seen
By Ron Harui

Aug. 8 (Bloomberg) -- The Australian dollar fell for a ninth day, the longest losing streak since 1980, as traders increased bets the central bank will reduce borrowing costs from a 12-year high.

Australia's currency headed for a third weekly loss, breaking through 90 U.S. cents for the first time in more than four months, as Reserve Bank of Australia Governor Glenn Stevens said on Aug. 5 that there was ``scope to move towards a less restrictive stance of monetary policy'' because of slowing consumer demand. The Australian dollar also declined after prices of commodities the nation exports such as crude oil and gold slid this week.

``There is growing talk of RBA rate cuts and commodity prices are plunging,'' said Akifumi Uchida, deputy general manager of the marketing unit at Sumitomo Trust & Banking Co. in Tokyo. ``A selling scenario seems to be under way for the Aussie,'' he said, referring to the currency by its nickname.

Australia's dollar dropped 2.2 percent, the most since March 20, to 89.14 U.S. cents at 6:35 p.m. in Sydney from 91.10 cents late in Asia yesterday. It reached 89.11 cents, the lowest since Feb. 8. The currency has lost 4.1 percent this week, the largest weekly decline since Aug. 17, 2007.

The Aussie was the second-worst performer of the 16 major currencies the past five days, as the yield premium on two-year Australian notes over similar-maturity Treasuries shrank to 3.41 percentage points this week, the least since November. Two-year government bond yields, those more sensitive to the outlook for monetary policy, dropped by the most since March.

Rate Bets

Six months after correctly identifying Australia's dollar as one of the best bets in the foreign-exchange market, Daiwa Asset Management Co., the biggest investor in the nation's debt, predicts that the rally is coming to an end. The firm holds 4 percent of the nation's government bonds. The Australian dollar touched 98.49 U.S. cents on July 16, the highest since 1983.

Traders are betting the RBA will lower its 7.25 percent benchmark rate by almost 1 percentage point in the next 12 months, compared with 32 basis points two weeks ago, according to a Credit Suisse Group index based on interest-rate swaps. A similar Credit Suisse index shows that a rate cut is certain in September. A basis point is 0.01 percentage point.

The New Zealand dollar, along with the Aussie and the South African rand, weakened the most among the 16 major currencies the past five days, as traders bet the Reserve Bank of New Zealand will cut its 8 percent benchmark rate by 1.5 percentage points in the next 12 months, up from 1.35 percentage points two weeks ago, according to another Credit Suisse Group index.

New Zealand Dollar

New Zealand's dollar declined 2.2 percent, the most since June 5, to 70.25 U.S. cents from 71.81 cents late in Asia yesterday. It touched 69.83 cents, the lowest since Sept. 12. The currency has fallen 3.4 percent this week, the biggest weekly loss since Oct. 19, 2007.

Australian economic reports for June over the past two weeks showed retail sales fell by the most in six years, home- building approvals unexpectedly declined for a second month and home-loan approvals dropped to a four-year low.

RBA's Stevens said Aug. 5 that ``it is looking more likely that demand will remain subdued and economic growth will be fairly slow over the period ahead.''

A benchmark rate of 7.25 percent in Australia, compared with 0.5 percent in Japan and 2 percent in the U.S., has made the nation's currency a favorite with investors looking to invest in higher-yielding assets.

`Buying Momentum'

``The market is pricing in aggressive easing by the central bank,'' said Yoshisada Ishide, a fund manager who oversees the equivalent of $1.5 billion at Daiwa SB Investments Ltd. in Tokyo ``The buying momentum is strong.''

Yields on two-year government debt may move between 5.5 percent and 6.25 percent by year-end, Ishide said.

Two-year government bonds climbed for a 13th day, taking the weekly loss to 29 basis points, the most since March 7. The yield on the two-year note fell 4 basis points today to 5.92 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due August 2010 rose 0.075, or A$0.75 per A$1,000 face amount, to 98.753.

Ten-year debt advanced for a second day, with the yield on the benchmark note falling 5 basis points to 5.93 percent.

Australia's currency also dropped this week along with the prices of gold and crude oil, the nation's third and fourth most-valuable exports.

Gold fell for a fifth straight session in New York yesterday, the longest losing streak since June 2007. Crude oil futures fell as low as $117.11 a barrel on Aug. 7, 20 percent below the July 11 record of $147.27. Commodity shipments contribute 17 percent to Australia's economy.