Australian Dollar Strengthens on Higher Prices of Gold, Nickel
The Australian dollar rose, ending a two-day slide, on speculation the nation’s export earnings will be bolstered by rising prices of metals such as gold and nickel.
The currency climbed to its highest this week after the price of gold, of which Australia is the world’s second-largest producer, gained on claims by North Korea it has detonated a nuclear bomb, spurring demand for safe-haven assets. The local dollar is linked to the performance of metals because raw materials account for about 60 percent of the nation’s exports.
“The North Korean situation pushing gold up should help the Australian dollar,” said Alex Nicholas, a Sydney-based corporate dealer at OzForex Ltd., an online foreign-exchange dealing firm. “A bounce back in metals should definitely help” the currency rise above 75 cents in the next two weeks, he said.
The Australian dollar bought 74.52 U.S. cents as of 4:52 p.m. in Sydney compared with 74.48 cents in late Asian trading yesterday, when it dropped to an 11-week low of 74.17 cents.
Gold futures for December delivery yesterday rose 1 percent to $582.80 an ounce on the Comex division of the New York Mercantile Exchange. The precious metal, for immediate delivery, gained as much as 0.5 percent today.
A measure of six metals traded on the London Metal Exchange, including nickel and zinc, climbed 0.5 percent. Nickel rose as much as 2.5 percent to the highest since at least 1987, zinc jumped as much as 4.2 percent to the highest since May 31, and aluminum added 2.1 percent.
Higher prices of commodities have helped shrink Australia’s trade deficit to a four-year low, a report last week showed.
“I’m still on the optimistic side for the Australian dollar,” said Harvinder Kalirai, head of research in Sydney at State Street Corp., which serves as a custodian for $10.7 trillion of assets. “We’re seeing positive things come through with an improvement in the trade numbers. Commodities Australia exports are holding up well.”
The currency will end 2006 at 78 cents, he forecast.
The local dollar also garnered support from speculation Glenn Stevens, in his first speech tomorrow as Governor of the Reserve Bank of Australia, will highlight the strength of the economy and bolster prospects for higher interest rates.
“The Australian dollar may have further to rise,” said Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The risk is Stevens might be quite supportive of the economic outlook.”
Interest-rate futures show traders see 46 percent odds of the central bank raising its overnight cash rate target a third quarter-point this year to 6.25 percent compared with 56 percent a month ago.
Australian government bonds fell for a third day. The yield on the 10-year benchmark bond rose 3 basis points, or 0.03 percentage point, to 5.63 percent, the highest since Sept. 21. The price of the 6 percent bond maturing in February 2017 fell 0.158, or A$1.58 per A$1,000 face amount, to 102.901. Bond yields move inversely to price.