RTTNews - Monday in Asia, the Australian and New Zealand dollars rose against their major counterparts as Asian stocks extended a global equity rally on growing optimism the global economy is recovering from the deepest recession since the 1930s, boosting demand for higher-yielding assets.
Benchmark interest rates are 3 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.
Asian markets are trading with solid gains today with investors indulging in heavy buying in financials, energy and automobile stocks amid renewed hopes of a swift global economic revival. The positive close on Wall Street on the back of better-than-expected existing home sales data and Federal Reserve chief's positive comments about the U.S. economy have contributed significantly to the buoyant mood in the Asia-Pacific region today. Most of the markets in the region are trading sharply higher with their benchmark indices recording very strong gains.
Japan's Nikkei 225 rose 3.15% while Australia's S&P/ASX 200 was up 2.71% and South Korea's Kospi Composite gained 1.66%. Taiwan shares were up 2.81%, Hong Kong's Hang Seng index was 1.85% higher and New Zealand's NZX-50 was up 0.86%.
On Friday, a report from the National Association of Realtors showed that existing home sales increased by much more than expected in the month of July, with the headline figure rising for the fourth consecutive month.
The report showed that existing home sales rose 7.2 percent to an annual rate of 5.24 million units in July from a 4.89 million unit rate in June. Economists had been expecting a more modest increase to a 5.0 million unit rate.
The NAR noted that the increase in sales was the largest monthly gain on record for the total existing-home sales series dating back to 1999. With the increase, existing home sales rose for the fourth consecutive month, the first four-month winning streak since June of 2004.
The markets also looked to remarks from Federal Reserve Chairman Ben Bernanke, who spoke on Friday about the recent financial crisis and the near-term economic outlook at the Kansas City Fed's annual conference in Jackson Hole, Wyoming.
The Fed chief said, Economic activity appears to be leveling out, both in the United States and abroad, adding that the prospects for a return to growth in the near term appear good.
However, Bernanke warned that the recovery might be sluggish at first, with unemployment declining only gradually from high levels.
ECB President Jean-Claude Trichet also warned the same gathering that he was a bit uneasy about the talk of conditions returning to normal.
There are some signs that the real economy is starting to come out of a period of free fall, but it did not mean there was not going to a bumpy recovery ahead, media reports quoted the European Central Bank chief Jean Claude Trichet as saying at the annual symposium.
Trichet said, we see some signs confirming that the real economy is starting to get out of the period of freefall, but this does not mean at all that we do not have a very bumpy road ahead of us.
The Australian currency climbed to a 10-day high against its U.S. and Japanese counterparts, 5-day high versus the European currency and a 4-day high versus the Canadian dollar.
The Australian currency edged higher to a 10-day high of 0.8414 against the U.S. currency during early Asian deals on Monday. If the Aussie gains further, 0.848 is seen as the next target level. The aussie-dollar pair closed Friday's North American session at 0.8351.
The aussie-dollar pair that hit an 18-day low of 0.8158 on August17 strengthened thereafter and has gained around 3% thus far.
Against the European currency, the Australian dollar reached a 5-day high of 1.7066 during Monday's early Asian deals. The Australian currency is currently trading at 1.7082 against the euro, with 1.687 seen as the next target level. The euro-aussie pair closed last week's trading at 1.7175.
Against the Japanese yen, the aussie rose to a 10-day high of 79.73 during Monday's early Asian deals. On the upside, 81.6 is seen as the next target level for the aussie. The aussie-yen pair closed Friday's New York deals at 78.82.
The aussie-yen pair that traded near a 4-week low of 76.74 on August 19 has gained around 4% since then.
The Australian currency showed strength against its Canadian counterpart during today's early Asian deals. At 8:50 pm ET, the aussie-loonie pair climbed to a 4-day high of 0.9084, compared to Friday's 16-day low of 0.8990. The next upside target level for the pair is seen around 0.917. The pair closed last week's deals at 0.9041.
The Canadian dollar rallied against other majors as oil rose above $74 a barrel today, trading near a 10-month high, amid increased optimism energy demand will rebound as the U.S. economy heads for a recovery.
U.S. crude for October delivery rose 38 cents to $74.47 a barrel by 8:38 pm ET. The contract settled up 98 cents at $73.89 per barrel on Friday, the highest settlement since October 20. London Brent crude gained 38 cents to $74.57 a barrel.
The New Zealand dollar advanced to a 10-day high versus its U.S., European and Japanese counterparts during Monday's early deals.
Against the U.S. currency, the New Zealand dollar climbed to a 10-day high of 0.6878 during early Asian deals on Monday. This may be compared to Friday's closing value of 0.6827. If the kiwi-dollar pair gains further, 0.692 is seen as the next target level.
The New Zealand currency has gained around 4% after hitting a 9-day low of 0.6603 on August 12.
The New Zealand dollar traded higher against the Japanese yen during Monday's early Asian deals. At 9:30 pm ET, the kiwi-yen pair rose to a 10-day high of 65.17, compared to 64.44 hit late New York Friday. The next upside target level for the pair is seen around 65.8.
The kiwi-yen pair that touched a 16-day low of 62.57 on August 19 has gained around 4% since then.
The NZ dollar that closed Friday's North American session at 2.1020 against the European currency edged higher to 2.0890 during Monday's Asian deals. This set a 10-day high for the kiwi. The euro-kiwi pair is currently trading at 2.0921 with 2.1076 seen as the next target level.
On the other hand, the New Zealand dollar slipped to 1.2266 against the Australian currency during today's early Asian deals. If the kiwi falls further, 1.231 is seen as the next target level. The aussie-kiwi pair closed last week's deals at 1.2246.
In the euro-area, the euro-zone industrial new orders report for June is due at 5:00 am ET. Traders expect the industrial new orders rose a seasonally adjusted 1.6 percent on month, while the pace of contraction is likely to have narrowed to 28.6 percent on year.
The Canadian retail sales report for June has been slated for release in the North American session.
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