MOMO'S BREAKOUT BOARD

[Traderzz]

Nice pick on the AUD....The big money have fell in love with the AUD over the years. Couple more reasons why below.

Oct 6, 2009 ... The Australian Dollar surged after the central bank unexpectedly raised interest rates to 3.25% and promised further rate hikes going ...

http://www.dailyfx.com/story/bio1/Australian_Dollar_Soars_as_RBA_1254808632525.html


Australian Dollar Breaks 93 U.S. Cents on Central Bank Minutes

By Candice Zachariahs

Oct. 20 (Bloomberg) -- The Australian dollar briefly rose above 93 U.S. cents as the central bank said it was “possibly imprudent” to keep borrowing costs at a half-century low in minutes of its October meeting. New Zealand’s dollar slipped.

The so-called Aussie traded near its strongest since August 2008 as Reserve Bank of Australia policy makers said keeping rates at “very low levels” for an extended period risks higher inflation. Futures traders are betting on a more than 30 percent chance the benchmark rate will rise another 75 basis points by year-end. Demand for the two South Pacific currencies was trimmed on speculation gains this month have been too rapid.

“The market has taken the RBA minutes as reasonably upbeat, but it’s already there in terms of the rates priced in for year- end,” said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase & Co. in Sydney. “The dips are going to be very shallow because there’s strong underlying sentiment for Aussie dollar, but it’s going to be a slow grind higher.”

Australia’s currency rose as high as 93.11 U.S. cents, the most since August 2008, before trading at 92.81 cents as of 5:15 p.m. in Sydney from 92.92 cents in New York yesterday. The currency fell 0.5 percent to 83.73 yen after earlier touching 84.33 yen, the most since October 2008.

New Zealand’s dollar fell 0.5 percent to 75.32 U.S. cents and earlier touched 75.76 cents, the strongest since July 2008. It bought 67.97 yen and reached 68.67 yen, the most in a year.

RBA Minutes

“The appreciation of the Australian dollar in recent months had reflected the generally improving sentiment in financial markets, the relative outperformance of the Australian economy and the strength of commodity prices,” policy makers said in minutes from their Oct. 6 meeting, when the RBA unexpectedly raised rates by a quarter-percentage point.

The Australian dollar’s 32 percent gain this year may extend toward parity with the greenback as market expectations of interest-rate gains are fanned by a “hawkish” central bank, Sydney-based Roger Bridges, who helps manage the equivalent of $11 billion as head of bonds at Tyndall Investment Management Australia Ltd., said in an interview yesterday.

National Bank of Australia today forecast the Aussie will trade at $1 by March 2010 and peak at $1.03 in September. NAB, Australia’s third-largest bank by market value, joins Barclays Capital and Citigroup Inc. in forecasting the currency will trade at parity. Morgan Stanley warned of a “temporary parity break” while saying the Aussie is “chronically overvalued,” in an Oct. 15 research note.

Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Stocks, Commodities

Both South Pacific currencies briefly touched the highest this year versus the yen as Asian equities continued a worldwide rally. Thirty-four of the 41 companies in the Standard & Poor’s 500 Index that reported since Oct. 7 surpassed analysts’ projections, according to Bloomberg data.

The Reuters/Jefferies CRB index of 19 raw materials advanced a sixth straight session yesterday. It has added 7.8 percent this month. The London Metals Index, tracking the prices of copper, aluminum, lead, tin, zinc and nickel, advanced 3.2 percent yesterday, approaching its highest level this year.

Gains were tempered as the 14-day relative strength index for the Australian dollar versus the greenback stood at 74.97 and at 71.67 against the yen. For New Zealand’s currency the reading was 69.96 against the U.S. dollar. A reading of 70 indicates a rally is approaching an extreme and a reversal may be imminent.

‘Intense’ Interest

Demand for New Zealand’s dollar was curbed before its central bank meets on Oct. 29. Governor Alan Bollard is forecast to keep the benchmark rate unchanged, according to the median forecast of economists surveyed by Bloomberg News. Bollard said on Sept. 10 he didn’t expect to raise borrowing costs until “the latter part of 2010.”

“Attention on the RBNZ policy statement next week will be intense,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “If they drop their now well- worn ‘latter part of 2010’ line, the market will extrapolate quickly toward a tightening in the first quarter.”

Traders are betting that Bollard will increase the benchmark rate by 2.05 percentage points over 12 months, according to a Credit Suisse Group AG index based on swaps trading.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.66 percent from 4.68 yesterday.

Australian government bonds advanced for the first day in five. The yield on 10-year notes fell five basis points, or 0.05 percentage point, to 5.57 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.328, or A$3.28 per A$1,000 face amount, to 97.649.

To contact the reporter on this story: Candice Zachariahs in Sydney at [e-mail]
Last Updated: October 20, 2009 02:18 EDT