RTTNews - Wednesday, the Australian and New Zealand dollars rose against their key counterparts as the global stock market rally increased demand for higher-yielding currencies.
Optimism in markets gained momentum after better than expected results from Goldman Sachs and Intel Corp. as well as fairly decent growth in U.S. retail sales, boosting confidence among investors that the regional economy is on the mend.
Australia's benchmark S&P/ASX 200 index .AXJO rose 57.4 points to 3,924.5, based on the latest available data, its highest close since June 30. The index has risen 5 percent in the past two sessions, its biggest two-day gain since late November.
New Zealand shares rose 0.6 percent to close today's trading at 2,764.1.
Goldman Sachs reported second quarter earnings of $2.72 billion, up on last year's $2.05 billion, and easily surpassing forecasts thanks to big gains in trading and underwriting. Other big U.S. banks, such as Citigroup Inc. and Bank of America Corp., will be reporting earnings later this week.
The chip maker posted sales and profit that breezed past Wall Street's forecasts -- though investors had to overlook a $1.45 billion antitrust fine imposed by the European Union in May. The fine, which Intel had to pay while it is appealing the case, gave the world's biggest semiconductor company its first quarterly net loss since 1986.
In economic news, the rate of Australia's economic contraction slowed in May, according to survey results released today by Westpac Bank and the Melbourne Institute. The leading index remained negative for an eighth straight month. Australia's leading economic index for May showed economic contraction at an annual rate of 3.9 percent, compared to a revised on-year contraction of 4.1 percent in April.
Westpac Chief Economist Bill Evans noted that the leading index remained well below its long-term trend of 2.6 percent contraction.
The Australian currency climbed to an 8-day high against the US dollar and the European currency and a 1-week high versus the Japanese yen.
Against the US dollar, the Australian currency edged higher to an 8-day high of 0.7990 during early deals on Wednesday. If the pair gains further, 0.807 is seen as the next target level. The aussie-dollar pair closed Tuesday's North American session at 0.7931.
The aussie-dollar pair that traded near an 8-week low of 0.7705 on July 13 strengthened thereafter and has gained around 4% thus far.
The Australian dollar lost ground after hitting an 8-day high of 1.7577 against the European currency during today's early Asian deals. The aussie thus slipped to 1.7665 against the euro before bouncing back at 2:55 am Eastern Time. The Australian currency is currently trading at 1.7604 with 1.724 seen as the next target level. The euro-aussie pair closed yesterday's deals at 1.7621.
The aussie has appreciated around 3% after hitting a 2-month low of 1.8109 on July 13.
Euro area annual inflation turned negative for the first time on record in June, the Eurostat confirmed today. Final report from the statistical office showed that the consumer price index or CPI dropped 0.1% year-on-year in June after remaining flat in May. A year earlier, inflation was 4%. On a monthly basis, consumer prices rose 0.2% in June.
Italian statistical office Istat said the consumer price index or CPI including tobacco rose 0.5% year-on-year in June, unchanged from the preliminary estimate released on June 30. On a monthly basis, consumer prices were up 0.1%.
Against the Japanese yen, the aussie rose to a 1-week high of 74.84 during Wednesday's early deals. On the upside, 76.1 is seen as the next target level for the aussie. The aussie-yen pair closed Tuesday's New York deals at 74.17.
The aussie-yen pair that plunged to a new multi-week low of 70.80 on July 13 has gained around 5.3% since then.
Today, the Bank of Japan retained its key interest rate, while at the same time extended its special funding measures for three months to facilitate corporate financing.
The Policy Board of the central bank unanimously voted to hold the uncollateralized overnight call rate at 0.1% as expected. The last change in rate was a 0.10% cut in interest rates at the bank's December 2008 meeting.
The Board also stood united in extending the overnight purchases of commercial papers and corporate bonds to December 31, 2009 from September 30. Special funds-supplying operations to facilitate corporate financing were also extended till December 31. At the same time, the central bank will continue the U.S. dollar funds-supplying operations till February 1, 2010.
During Wednesday's early deals, the Australian dollar jumped to 0.9053 against its Canadian counterpart, compared to yesterday's 4-week low of 0.8952. The next upside target level for the Australian currency is seen around 0.912. The aussie-loonie pair closed yesterday's New York session at 0.8986.
The New Zealand dollar also edged higher against its U.S. and Japanese counterparts during today's early deals.
The NZ dollar climbed to a 2-week high of 0.6430 against the US dollar and an 8-day high of 60.23 versus the Japanese yen. The next upside target level for the New Zealand currency is seen around 0.647 against the greenback and 62.3 against the yen. The New Zealand dollar closed Tuesday's trading at 0.6392 against the greenback and 59.79 versus the yen.
On the other hand, the kiwi showed weakness against the European currency and the Australian dollar. The New Zealand dollar declined to 2.1954 against the euro and 1.2450 versus the aussie, compared to yesterday's closing values of 2.1874 and 1.2421, respectively. If the NZ dollar falls further, it may likely target 2.23 against the single currency and 1.252 versus the Australian currency.
From the U.S., the Labor Department will release its consumer prices report for June at 8:30 am ET. Economists expect the headline figure to rise 0.6 percent after climbing by 0.1 percent last month.
At the same time, Empire State Manufacturing Survey results for July by the Federal Reserve Bank of New York is due.
At 9:15 am ET, industrial production figures for June is due out with economists expecting production to fall by 0.6 percent after a 1.1 decline in May.
The US Federal Open Market Committee will release its latest policy meeting Minutes at 2:00 pm ET.
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