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Aussie, Kiwi Dollars Climb After Home-Loan Report; Won Advances

By Masaki Kondo and Candice Zachariahs
April 09, 2014 1:54 AM EDT

The Australian and New Zealand currencies advanced after data showed home-loan (AUHFCHG) approvals increased at a faster pace than estimated in the larger nation. The dollar snapped a three-day slide versus the yen.

The won jumped to the highest level since 2008 on speculation South Korea will refrain from halting gains in its currency. A gauge of carry trades rose toward its strongest in 20 months after volatility fell to levels last seen in 2007, helping boost returns from holding higher-yielding currencies. The pound climbed to a one-month high against the euro before Bank of England policy makers meet tomorrow.

“The home loans data continue the theme of a basing in the Australian economy, which should support the Aussie,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “The New Zealand dollar is twinned to the Aussie at the moment.”

Australia’s currency reached 93.87 U.S. cents, the strongest since Nov. 20, before trading at 93.66 as of 6:48 a.m. in London, rising 0.1 percent from yesterday. New Zealand’s dollar appreciated 0.3 percent to 87 U.S. cents after touching 87.08, the highest since August 2011.

The greenback was little changed at $1.3790 per euro after sliding 0.4 percent yesterday. It rose 0.2 percent to 102.01 yen following a 1.3 percent drop, the most since Aug. 27. Japan’s currency weakened 0.2 percent to 140.69 per euro.

Home-loan approvals rose 2.3 percent in February from a month earlier, the biggest increase since September, figures from Australia’s statistics bureau showed today. That compares with the 1.5 percent growth estimated by economists in a Bloomberg News survey. A separate private report showed consumer confidence improved this month for the first time since November.

Dollar Rebounds

Demand for the greenback was supported before the Federal Reserve releases minutes of its March meeting today as investors weigh when the U.S. central bank will start to raise rates.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against its 10 major counterparts, was little changed at 1,009.05. It lost 1.1 percent in the three sessions through yesterday when it closed at 1,008.53, the lowest since Oct. 30.

The U.S. central bank reduced monthly bond purchases by $10 billion to $55 billion at the March 18-19 meeting. Fed Chair Janet Yellen said that time the central bank may start to increase interest rates “around six months” after ending its asset-buying program.

“I expect the dollar to bottom out,” said Masato Yanagiya, the head of foreign exchange and money trading in New York at Sumitomo Mitsui Banking Corp., a unit of Japan’s second-biggest financial group by market value. “Bullish views on the U.S. economy remain intact in markets.”

Carry Trade

UBS AG’s V24 Carry Index was at its highest since April last year, when the gauge reached a level unseen since August 2012, signaling increased gains for those who borrow in low interest-rate currencies to buy into markets offering higher yields. It has risen 4 percent this year.

Expectations for swings in nine major currency pairs for the coming three months slid this week to the lowest since July 2007, as measured by a Deutsche Bank AG index.

“The carry trade in various guises is currently in vogue,” Ray Attrill, the global co-head of currency strategy in Sydney at National Australia Bank Ltd., wrote in a research note today. “Let’s not forget the Fed continues to print some $3 billion per working day to facilitate the process.”

Won Climbs

The won added 1 percent to 1,041.43 per dollar after gaining to 1,040.46, a level unseen since August 2008.

While the Bank of Korea will let the market set exchange rates “in principle,” it will act against temporary, excessive or one-way bets, Governor Lee Ju Yeol said in a prepared response ahead of a parliamentary hearing last month.

“The globally weak dollar, and the Korean government not openly giving any verbal warnings about currency appreciation, support the won,” said Son Eun Jeong, a Seoul-based foreign-exchange analyst at Woori Futures Co. “Until now there was always concern about intervention when the rate approached 1,050.”

Sterling appreciated against most of its 16 major peers yesterday as data showed factory output rose in February three times faster than economists estimated in a Bloomberg survey. BOE Governor Mark Carney said rates might begin to rise before the general election in May 2015, according to an interview published on April 3 with the Northern Echo newspaper.

The pound was little changed at 82.35 pence per euro after touching 82.32, the strongest since March 6.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda, Jonathan Annells

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