Australian, New Zealand Dollars Advance as IMF, World Bank Hold Meetings

 By Masaki Kondo - Sep 23, 2011 9:20 AM GMT+0800 

The Australian and New Zealand dollars rebounded from their lowest levels in more than five months as policy makers gather in Washington for annual meetings of the International Monetary Fund and World Bank.
The so-called Aussie gained versus most of its 16 major counterparts after U.K. Prime Minister David Cameron and five other leaders of Group of 20 nations urged French President Nicolas Sarkozy to use his chairmanship of the body to find agreement on actions to boost the global economy. New Zealand’s currency rose against the yen for the first time this week as a technical indicator signaled currency losses were too rapid.
“Traders tend to speculate around meetings, particularly” when major leaders are involved, said Kara Ordway, a foreign- exchange strategist at City Index Asia Pacific in Sydney. “I do think this will be a catalyst for them, combined with such big moves overnight, to cover their short positions.”
Australia’s dollar rose to 98.24 U.S. cents at 11:18 a.m. in Sydney from 97.42 cents in New York yesterday, when it touched 96.92 cents, the lowest since Dec. 2. It jumped 0.9 percent to 74.91 yen. New Zealand’s currency advanced to 78.68 U.S. cents from 78.05 cents after sinking to 77.53 cents yesterday, a level unseen since April 12. The so-called kiwi climbed 0.8 percent to 60 yen.
“We need decisive action to support growth, confidence, and credibility,” Cameron, along with the leaders of Australia, Canada, Indonesia, South Korea and Mexico wrote to Sarkozy in the letter released by the U.K. prime minister’s office. “We have not yet mastered the challenges of the crisis.”

‘More Force’

U.S. Treasury Secretary Timothy F. Geithner yesterday said Europe will act “with more force” to combat the debt crisis threatening global growth. He spoke as finance ministers and central bankers from the G-20 nations gather for a three-day meeting of the IMF and World Bank, which will end on Sept. 25.
The New Zealand dollar’s 14-day relative strength index versus the yen slid to 22.7 yesterday, below the 30-level that some traders see as signaling an asset’s price may reverse direction after falling too rapidly.
The Aussie and kiwi were headed for their biggest weekly losses in 16 months as stocks tumbled globally, sapping demand for higher-yielding currencies.
“During this kind of risk-off period that we’re seeing, the Aussie and kiwi are traders’ favorite risk currencies to sell,” said City Index’s Ordway. “People are realizing that the U.S. and Europe are staring at recession in the face, and I guess moving on from that, what people are now worried about is that we’ll see a bigger slowdown in Asia.”

Weekly Slumps

The MSCI Asia Pacific excluding Japan Index dropped 0.9 percent today, set for a 9.2 percent slump this week, the worst five-day performance since November 2008. Japan’s financial markets were closed today for a national holiday.
The Australian dollar has retreated 5.7 percent versus the yen since Sept. 16, while the New Zealand currency has slumped 5.5 percent during the period. They were the biggest weekly declines since May 2010.
Yields on Australia’s 10-year bonds fell below 4 percent for the first time since January 2009. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates based on three-month bill rates, slid to 3.015 percent, the lowest since at least 1993 when Bloomberg started collecting the data. Swaps are often used to speculate on changes in interest rates.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net.