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Kiwi Rises to 1-Month High on Inflation; Aussie Holds Advance - (Bloomberg)

Posted by Chris Advincula on Oct 16, 2013 12:28:00 AM

New Zealand’s dollar rose to a one-month high after data showed inflation accelerated at the fastest pace in two years, fanning speculation the central bank will raise borrowing costs.

Two-year interest rate swaps reached the highest since 2011 as traders are almost certain that the Reserve Bank of New Zealand will raise the official cash rate from 2.5 percent by June, according to data compiled by Bloomberg. The Australian dollar held a five-day gain after meeting minutes yesterday from the nation’s central bank showed that policy makers refrained from saying a weaker currency would help the economy.

“Because of the resilient economy and inflation concerns,” markets are expecting a rate increase in New Zealand, said Kengo Suzuki, the chief currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest financial group by market value. “New Zealand is almost the only developed country with a rate increase coming into sight, so the kiwi is likely to remain strong.”

New Zealand’s currency climbed 0.3 percent to 84.04 U.S. cents as of 11:14 a.m. Sydney time after reaching 84.08, the strongest since Sept. 19. The Aussie dollar advanced 0.1 percent to 95.39 U.S. cents after strengthening 1.1 percent in the five days through yesterday.

New Zealand’s two-year interest rate swap touched 3.62 percent, the highest since August 2011. Consumer prices in the South Pacific nation rose 0.9 percent in the third quarter, the fastest pace of inflation since the period ended June 2011, the statistics bureau said today.

Australia’s three-year bond yield climbed two basis points to 3.178 percent, after touching 3.179 percent, the most since April 2012. A basis point is 0.01 percentage point.

Demand for higher-yielding currencies increased as Senate leaders resumed talks aimed at avoiding a U.S. default and ending the government shutdown after the Republican-controlled House scrapped a vote yesterday on its plan. 


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