Aussie Dollar Rises to 25-Year High Versus Pound on Commodities

Jan. 7 -- The Australian dollar climbed to the strongest in 25 years versus the pound and rose against all 16 major currencies as commodity prices gained and retail sales grew more than four times as fast as economists had estimated.

The so-called Aussie touched a two-year high against the euro after the Bureau of Statistics said retail sales climbed 1.4 percent from October, when they gained a revised 0.4 percent. New Zealand’s currency reached the most in two months versus the yen as the nation posted its narrowest annual trade shortfall in more than seven years.

“It’s all about the commodity story at the moment and today’s retail sales data may get the market excited about more rate hikes in Australia,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “If we can make a clear break above 58 pence, people have got to start thinking about the 60-level as a realistic possibility.”

Australia’s dollar touched 57.655 pence, the most since March 1985, before trading at 57.577 at 4:58 p.m. in Sydney. It bought 84.89 yen after earlier reaching 85.55 yen, the highest since Sept. 29, 2008. The currency gained 0.1 percent to 92.08 U.S. cents, near the strongest since Dec. 4, from 91.98 cents in New York. It touched 0.6416 euro, the most since November 2007.

New Zealand’s dollar bought 73.72 U.S. cents from 73.78 cents in New York yesterday. It traded at 67.97 yen and reached 68.58 yen, the most since Oct. 27.

Fed Minutes

Demand for Australia’s dollar was also boosted after minutes of a Federal Reserve meeting released yesterday showed policy makers debated extending stimulus measures. Swaps traders raised to 62 percent the chance that Australia’s central bank will increase interest rates when it meets on Feb. 2, from 54 percent yesterday, when according to a Credit Suisse AG index.

“Our forecasts have the Aussie heading back toward last year’s highs near 94 cents in the first quarter,” said Amber Rabinov, an economist in Melbourne at Australia & New Zealand Banking Group Ltd.

The Reuters/Jefferies CRB Index of commodities yesterday climbed for a third day to the strongest level since October 2008. Crude oil, Australia’s fourth most-valuable commodity export, gained for a 10th day yesterday in the longest stretch since February 1996. Commodities account for more than half of Australia’s and New Zealand’s overseas shipments.

Trade Deficit

Australia’s trade deficit narrowed in November with the shortfall at A$1.7 billion ($1.6 billion) from a revised A$2.08 billion in October, the Bureau of Statistics said.

The Australian dollar has been the second best-performing currency against the euro over the past three months among the 16 most-traded. Demand for the euro has waned on speculation Greece’s fiscal problems may also engulf Spain, Ireland and other nations that share the common currency.

“The Aussie doesn’t suffer from the same concerns on the fiscal side that Europe does,” said Sean Callow, a senior currency strategist at Westpac in Sydney. “There’s no obvious barrier to a test of 65 euro cents.” That would be the most the Australian dollar has traded at since September 2000.

New Zealand’s annual trade deficit narrowed to NZ$846 million ($624 million) in the 12 months ended Nov. 30 from a revised NZ$1.17 billion in the year through October, the statistics bureau said today. The shortfall was the least since September 2002.

“The possibility of near-term Reserve Bank of New Zealand hikes cannot be completely ruled out” after the trade figures signaled fourth quarter growth may show an improvement over the previous three-month period, wrote Eric Lascelles, Toronto-based chief economics and rates strategist at Toronto-Dominion Bank, Canada’s second-biggest lender.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.59 percent from 4.55 percent yesterday. Australian government bonds were little changed with the yield on 10-year notes at 5.65 percent, according to data compiled by Bloomberg.