Australian, N.Z. Dollars Surge Against Yen on Yield Advantage
By David McIntyre
June 1 (Bloomberg) -- The Australian and New Zealand dollars surged to the highest in more than 15 years against the yen as traders were attracted to the higher yields on investments.
New Zealand's dollar was this week's biggest gainer versus the yen among the 16 most-traded currencies, as Bank of New Zealand Ltd. revised its view to say the central bank will raise interest rates next week. Australia's dollar was third best, as signs of a stronger U.S. economy and rising global stocks encouraged investors to increase carry trades, where they buy higher-paying investments with borrowed money.
``Risk is back,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``There's still excess global liquidity and a chase for yield. In that environment the Aussie and kiwi stand out,'' she said, referring to the currencies by their nicknames.
New Zealand's dollar rose 2 percent this week to 90.14 yen at 4:32 p.m. in Wellington from 88.41 last week and reached 90.17, the highest since August 1990. It traded at 73.98 U.S. cents from 72.57 cents a week ago, snapping a five-week slide.
The Australian dollar gained 1.4 percent to 100.97 yen from 99.61 late in New York May 25 and touched 101 yen, the most since April 1992. The currency bought 82.88 U.S. cents from 81.84 cents last week, the biggest weekly gain in seven.
Australia's rate of 6.25 percent and New Zealand's 7.75 percent compare with Japan's 0.5 percent.
Carry Trades Bolstered
The Antipodean currencies headed for the biggest weekly rise since April 13 against the yen as Asian stocks gained the most in more than two months. The Morgan Stanley Capital International Asia Pacific Index of equities added 2.8 percent this week, the most since March 23.
``Relatively high-yielding currencies appreciated as carry trade sentiment was bolstered by the rebound in global equity indices,'' said Danica Hampton, currency strategist at Bank of New Zealand in Wellington.
The Australian dollar-yen cross rate had a correlation coefficient of 0.93 with the MSCI Asia Pacific index in the past 12 months as did the New Zealand dollar-yen. A reading of 1 would mean they moved in lock-step.
The kiwi is the world's second-biggest gainer in the past 12 months after Columbia's peso as New Zealand's official cash rate is the highest after Iceland's among countries with the top rating at Moody's Investors Service.
`Out of Control'
Bank of New Zealand revised its view late yesterday. Head of Research Stephen Toplis said the economy is ``speeding out of control'' and the case for an increase is compelling, according to a report e-mailed to Bloomberg News.
``Building speculation about the Reserve Bank hiking rates should keep the New Zealand dollar well supported,'' Bank of New Zealand's Hampton said.
Only two out of 13 economists surveyed by Bloomberg News are predicting the Reserve Bank of New Zealand will raise its benchmark rate next week. A third economist is expecting a rate rise by the end of the year, while 10 are predicting rates will remain unchanged for the rest of 2007.
Australian and New Zealand 10-year bonds fell. The yield on the Australian bond rose 3 basis points, or 0.03 percentage point, to 6.04 percent and New Zealand's gained 4 basis points to 6.39 percent. Bond yields move inversely to the price.
By David McIntyre
June 1 (Bloomberg) -- The Australian and New Zealand dollars surged to the highest in more than 15 years against the yen as traders were attracted to the higher yields on investments.
New Zealand's dollar was this week's biggest gainer versus the yen among the 16 most-traded currencies, as Bank of New Zealand Ltd. revised its view to say the central bank will raise interest rates next week. Australia's dollar was third best, as signs of a stronger U.S. economy and rising global stocks encouraged investors to increase carry trades, where they buy higher-paying investments with borrowed money.
``Risk is back,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``There's still excess global liquidity and a chase for yield. In that environment the Aussie and kiwi stand out,'' she said, referring to the currencies by their nicknames.
New Zealand's dollar rose 2 percent this week to 90.14 yen at 4:32 p.m. in Wellington from 88.41 last week and reached 90.17, the highest since August 1990. It traded at 73.98 U.S. cents from 72.57 cents a week ago, snapping a five-week slide.
The Australian dollar gained 1.4 percent to 100.97 yen from 99.61 late in New York May 25 and touched 101 yen, the most since April 1992. The currency bought 82.88 U.S. cents from 81.84 cents last week, the biggest weekly gain in seven.
Australia's rate of 6.25 percent and New Zealand's 7.75 percent compare with Japan's 0.5 percent.
Carry Trades Bolstered
The Antipodean currencies headed for the biggest weekly rise since April 13 against the yen as Asian stocks gained the most in more than two months. The Morgan Stanley Capital International Asia Pacific Index of equities added 2.8 percent this week, the most since March 23.
``Relatively high-yielding currencies appreciated as carry trade sentiment was bolstered by the rebound in global equity indices,'' said Danica Hampton, currency strategist at Bank of New Zealand in Wellington.
The Australian dollar-yen cross rate had a correlation coefficient of 0.93 with the MSCI Asia Pacific index in the past 12 months as did the New Zealand dollar-yen. A reading of 1 would mean they moved in lock-step.
The kiwi is the world's second-biggest gainer in the past 12 months after Columbia's peso as New Zealand's official cash rate is the highest after Iceland's among countries with the top rating at Moody's Investors Service.
`Out of Control'
Bank of New Zealand revised its view late yesterday. Head of Research Stephen Toplis said the economy is ``speeding out of control'' and the case for an increase is compelling, according to a report e-mailed to Bloomberg News.
``Building speculation about the Reserve Bank hiking rates should keep the New Zealand dollar well supported,'' Bank of New Zealand's Hampton said.
Only two out of 13 economists surveyed by Bloomberg News are predicting the Reserve Bank of New Zealand will raise its benchmark rate next week. A third economist is expecting a rate rise by the end of the year, while 10 are predicting rates will remain unchanged for the rest of 2007.
Australian and New Zealand 10-year bonds fell. The yield on the Australian bond rose 3 basis points, or 0.03 percentage point, to 6.04 percent and New Zealand's gained 4 basis points to 6.39 percent. Bond yields move inversely to the price.
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