by winston » Mon May 19, 2008 10:39 am
Australian Dollar Rises to 24-Year High; N.Z. Dollar Declines
By Lilian Karunungan and Chris Young
May 19 (Bloomberg) -- The Australian dollar rose to a 24- year high against the U.S. currency as prices of raw materials the nation exports rallied, including gold. New Zealand's dollar fell on concern the central bank will cut interest rates.
Australia's currency, known as the Aussie, extended its gain this year to 8.6 percent as demand for the nation's higher- yielding assets increased after a U.S. report on May 16 showed consumer confidence slumped. Exports of raw materials account for 17 percent of Australia's economy. New Zealand's currency slid as traders are betting the nation's central bank will be the world's most aggressive in cutting borrowing costs.
``The Australian dollar looks good now and it looks more likely we can break new highs and go on to parity'' with the U.S. dollar, said Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. ``With a weak U.S. dollar and higher commodities, the Aussie will outperform.''
Australia's dollar rose as high as 95.71 U.S. cents, the most since March 1984, before trading at 95.32 cents as of 12:14 p.m. in Sydney, from 95.56 late in New York on May 16. The currency may climb to 96.50 this week, approaching the 1984 high of 96.53, Sydney-based Morriss said.
New Zealand's currency fell to 77.16 U.S. cents compared with 77.41 cents late last week. Australia's currency traded at NZ1.2371 from NZ$1.2349 on May 16.
The Australian dollar climbed 1.6 percent on May 16 as the UBS Bloomberg Constant Maturity Commodity Index rose 1 percent, near a record-high. Gold, Australia's third-most valuable export, gained 1.6 percent to $899.90 an ounce last week.
Overseas Sellers
New Zealand's dollar has depreciated 6 percent since reaching 82.13 U.S. cents on March 14, the highest since it was allowed to trade freely in 1985.
BlackRock Inc., which oversees $1.4 trillion, and DWS Investment GmbH, part of Germany's largest bank, said they sold the New Zealand dollar as home sales slumped to a 16-year low in April and employment fell the most since 1989. Citigroup Inc., the fourth-biggest foreign-exchange trader, said the so-called kiwi will get ``roasted'' after a 3 percent drop in the past two months. Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, forecasts a 17 percent decline by year-end.
``The New Zealand economy looks to be in pretty dire shape,'' said Stephen Miller, a money manager in the Sydney office of New York-based BlackRock. ``The central bank might cut, and cut aggressively. The New Zealand dollar looks vulnerable.''
`Pretty Dire'
The Reserve Bank of New Zealand will lower its 8.25 percent cash rate by about 119 basis points 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 Australia will keep its benchmark interest rates at 7.25 percent.
``The Aussie dollar does have a lot of support,'' said Tobias Davis, senior currency dealer at Custom House Global Foreign Exchange in Sydney. ``We have risk appetite growing. We have strong commodity prices. We have the RBA seeming to be reasonably still hawkish on inflation and interest rates.''
Futures traders decreased bets the Australian dollar will gain against the U.S. currency, figures from the Washington- based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those betting on a drop -- so-called net longs -- was 57,454 on May 13, from net longs of 65,421 a week earlier.
``The market isn't overly long the Australian dollar so from a technical perspective it looks like we'll see more upward momentum,'' said Morriss.
Australian and New Zealand government bonds were little changed. The yield on Australia's 5 1/4 percent note held at 6.32 percent, according to data compiled by Bloomberg. The equivalent New Zealand bond yielded 6.35 percent.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"