RTTNews - Monday in Asia, the Australian dollar soared to a fresh multi-month high against the U.S. currency after reports showed that Australia's retail sales advanced for a second month in April and the nation's manufacturing PMI improved in May, providing evidence that the nation's recession may be easing.
The aussie also climbed to a 13-day high against the euro and showed modest strength against the yen and the loonie.
Retail sales in Australia gained a seasonally adjusted 0.3 percent in April compared to the previous month, the Australian Bureau of Statistics said today, coming in at A$19.35 billion. Although the retail sales climbed, it came in below expectations for a 0.5 percent monthly gain following the increase of 2.2 percent in March and the fall of 2.0 percent in February.
Australia's Purchasing Managers' Index or PMI rose 7.4 points to 37.5, to reach its highest level in the last seven months, the latest survey from the Australian Industry Group and Pricewaterhouse Coopers said today. In April, the index had reached a record low of 30.1.
Commenting on the latest PMI data, the AiG's Chief Executive Heather Ridout said, The lift in the Australian PMI in May brings it into much closer alignment with the direction and strength of global PMI's. The slowing of falls in new orders and production across the sector in this month's data may indicate that stimulatory fiscal and monetary policy is having a stabilizing effect.
Meanwhile, a report from the TD Securities and Melbourne Institute showed today that Australia's inflation gauge dropped 0.3% month-on-month in May, after remaining unchanged in April.
Annually, the inflation gauge rose 1.5% in May, slower than the 2.1% rise in April. This was the slowest annual increase since the series began, and was much lower than the Reserve Bank of Australia's long term-term target range of 2% to 3%.
A gain in Asian shares also lifted the Australian and New Zealand dollars today. Benchmark interest rates are 2.5 percent in New Zealand and 3 percent in Australia, compared with 0.1 percent in Japan and as low as zero percent 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.
The stock markets across the Asia-Pacific region are trading higher today, following the gains on Wall Street Friday and on prospects of an economic recovery. Resource stocks are advancing on higher commodity prices. However, gains in the markets are limited as investors are keeping a wary eye on events regarding automaker General Motors Corp., which is preparing to file for bankruptcy later in the day.
In mid-morning trades, the benchmark S&P/ASX 200 Index gained 16.30 points or 0.43% to 3,834.40 and the All Ordinaries Index added 16.50 points or 0.43% to 3,829.80.
The Reserve Bank of Australia is scheduled to meet tomorrow to decide on interest rates. Analysts expect the RBA to keep rates steady at 3%.
To revive the economy, the central bank cut its benchmark rate by a record 4.25 percentage points between early September and April to 3 percent. The government has been distributing more than A$12 billion to lower-income earners, with most of the cash handed out in April.
Treasurer Wayne Swan, in the government's annual budget last month, unveiled a A$22 billion program of spending on roads, rail, ports, hospitals and education.
The nation is in a good position to benefit from a global recovery later this year as interest-rate cuts drive domestic demand and a pickup in China stokes exports, Reserve Bank Governor Glenn Stevens said on May 19.
The Australian dollar, which closed last week's trading at 0.8015 against the U.S. currency jumped to 0.8068 during Asian deals on Monday. This set the highest point for the aussie since September 30, 2008. On the upside, 0.82 is seen as the next target level for the Aussie.
Australia's dollar approached an eight-month high against the greenback as manufacturing in China, the nation's biggest trading partner, expanded for a third month.
China's purchasing managers' index posted a score of 53.1 in May, the China Federation of Logistics and Purchasing said today, easing from 53.5 in April. The index remained above 50 for the third consecutive month following five straight months below that level. Export orders moved up to 50.1 in May from 49.1 in April.
The U.S. dollar weakened on speculation General Motors Corp. will file for bankruptcy today, adding to signs the global recession is far from over. Most of the company's assets would be sold to a new company sponsored by the U.S. Treasury Department. UAW-represented employees have ratified modifications to the GM-UAW 2007 national labor agreement. The amended agreement covers about 54,000 hourly employees located in 46 U.S. facilities and is expected to help GM restructure when it enters bankruptcy.
The Australian currency tumbled to a 5 1/2 -year low of 0.6012 against the greenback in October 2008. The aussie-greenback pair then gained 17% and reached a 3-month high of 0.7271 on January 07, 2009. Although the aussie lost 14% thereafter it bounced back after hitting a 2 1/2 -month low of 0.6251 on February 02. Since then, the aussie-greenback pair has advanced 22.5%.
In Asian deals on Monday, the Australian dollar rose to a 13-day high of 1.7553 against the euro. This may be compared to Friday's closing value of 1.7660. If the aussie strengthens further, it may likely target the 1.749 level.
The Aussie has appreciated 2.5% against the euro since reaching an 8-day low of 1.8013 on May 26.
After a brief slide, the Aussie gained against the currencies of Japan and Canada in Asian deals on Monday. At present, the aussie is worth 76.59 against the yen and 0.8764 against the loonie, compared to last week's close of 76.33 and 0.8739, respectively. If the aussie climbs further, it may likely target 76.95 against the yen and 0.881 against the loonie.
In economic news from Japan, labor cash earnings for companies with five or more employees eased 2.5 percent on year in April, the Ministry of Health, Labor and Welfare said today. That compares to forecasts for a 4.2 percent annual decline after the revised 3.9 percent fall in March.
The New Zealand dollar also soared against its U.S., European and Japanese counterparts today. The New Zealand dollar edged up to new multi-months highs of 0.6436 against the greenback and 2.1977 against the euro. The next upside target level for the kiwi is seen at 0.66 against the U.S. currency and 2.126 against the euro. The kiwi-greenback pair closed trading at 0.6406 and the euro-kiwi pair at 2.2093 on Friday.
The New Zealand dollar reversed direction against the yen after hitting a low of 60.62 at 9:00 pm ET Sunday. Currently, the kiwi-yen pair is worth 61.25 with 61.42 seen as the next target level. At last week's close, the pair was quoted at 61.01.
On the other hand, the NZ dollar bounced between 1.2571 and 1.2508 against the Aussie in Asian deals on Monday. The next upside and downside target levels for the aussie-kiwi pair are seen at 1.263 and 1.249, respectively. The pair was worth 1.2525 at Friday's close.
Looking ahead, the final manufacturing PMI reports from the major European economies for the month of May are expected in the upcoming session.
Across the Atlantic, the U.S. PCE deflator for April, ISM manufacturing data for May and the construction spending report for April have been slated for release in the New York session.
From Canada, the first quarter GDP report and the industrial product price index for April are due.
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