Australian Dollar Gains Against Majors After RBA Minutes

The Australian dollar rose after the release of minutes showing the central bank saw domestic economic growth overshadowing a “fragile” global outlook at its Aug. 7 policy meeting.

The so-called Aussie added to yesterday’s gains against most of its major peers as the Reserve Bank of Australia made no mention of intervening to curb the currency’s strength, which has persisted despite a decline in the terms of trade. The Australian and New Zealand currencies were also buoyed by speculation talks among European leaders this week will lead to stronger measures to counter the region’s debt crisis, boosting risk demand.

“The market was looking for a fair bit more commentary on the Aussie dollar itself following the monetary policy statement a week and a half ago as well as the statement accompanying the policy decision where the RBA seemed to ramp up its rhetoric about the currency,” said David Forrester, senior vice- president for Group-of-10 foreign-exchange strategy at Macquarie Bank Ltd. in Singapore.

The Australian dollar climbed 0.5 percent to $1.0499 as of 5:20 p.m. in Sydney after rising 0.2 percent yesterday. New Zealand’s currency, nicknamed the kiwi, rose 0.5 percent to 81.27 U.S. cents.

Policy ‘Appropriate’

The RBA’s decision to leave its benchmark rate unchanged at 3.5 percent was “appropriate” given the outlook for domestic inflation and growth even though “the global economic environment remained fragile,” according to the minutes released today.

The bank also said that the Australian dollar exchange rate “had remained at a relatively high level notwithstanding the weakening in the global outlook and decline in commodity prices.”

The Australian dollar has risen 2.8 percent so far this year even as the ratio of export prices to import prices has fallen by 17 percent, according to a Citigroup Inc. index.

“The sense that we’re getting across our trading desk is that a number of investors were short heading into these minutes, expecting some sort of comment possibly on intervention, and we’re just seeing those positions unwound,” said Andrew Salter, a strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) A short position is a bet that a currency or asset will decline in value.

Stevens Testimony

RBA Governor Glenn Stevens is scheduled to testify before the House of Representatives Standing Committee on Economics in Canberra on Aug. 24.

“You will get a bit more color out of the governor on Friday,” said Peter Dragicevich, a Sydney-based foreign- exchange economist at Commonwealth Bank of Australia. (CBA) “I’m sure he’ll be pressed on the usual topics such as bank funding, and also probably pressed on the currency and its impact on the economy,”

Appetite for higher-yielding assets was also supported ahead of meetings between political leaders in Europe which may lead to stronger measures to counter the region’s debt crisis.

Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro group of finance ministers, will visit Greece tomorrow for talks on the indebted nation’s fiscal adjustment program. German Chancellor Angela Merkel and French President Francois Hollande meet in Berlin on Aug. 23 to discuss the debt crisis, and both are set to talk separately with Greek Prime Minister Antonis Samaras later in the week.

ECB Purchases

The South Pacific currencies pared their gains yesterday after Germany’s Bundesbank stepped up its criticism of the European Central Bank’s plan for government bond buying and the ECB denied a report by Der Spiegel magazine that it had discussed a plan to set yield limits on euro-bloc bonds.

In the U.S., the Federal Reserve is due to publish minutes tomorrow of its two-day meeting that ended on Aug. 1. The central bank, which has pledged to keep its benchmark rate near zero through 2014, refrained from adding to the $2.3 trillion in asset purchases it has already made to support the economy. Its next decision is on Sept. 13.

The yield on 10-year Australian government notes was little changed at 3.45 percent today. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.76 percent.