Australian Dollar Rises For a Second Day as Commodities Gain

By Candice Zachariahs

July 11 (Bloomberg) -- The Australian dollar rose to near its highest this week as higher prices of commodities the nation exports boosted the outlook for the economy.

The Aussie, as the local currency is called, climbed for the second day after the UBS Bloomberg Constant Maturity Commodity Index advanced 2 percent, the most in nine days. Gold, Australia's third-most valuable raw material export, gained the most in a week as investors bought the metal as a safe haven.

``Oil, gold and aluminum prices moved sharply higher,'' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. ``That's a pretty positive story for the Aussie. It reflects U.S. dollar weakness as much as supply and demand dynamics.''

The currency traded at 96.17 U.S. cents at 8:40 a.m. in Sydney, from 96.03 cents in late Asian trading yesterday. It bought 102.94 yen, unchanged from yesterday.

Exports of raw materials contribute about 17 percent to Australia's economy. The Australian government last month forecast sales of coal, iron ore and other commodity exports will generate a record A$212 billion ($204 billion) windfall for the economy in the year ending June 30, 2009, compared with A$151 billion estimated sales in 2008.

Gold Gains

Gold futures for August delivery climbed 1.4 percent to $942 an ounce on the Comex division of the New York Mercantile Exchange yesterday, as mounting tensions over Iran's nuclear program spurred demand for the metal.

Australia's dollar climbed toward its 25-year high of 96.68 cents touched June 30 as the U.S. currency declined on concern losses related to the U.S. mortgage market are worsening.

U.S. Treasury Secretary Henry Paulson told lawmakers yesterday that markets will take ``additional time'' to stabilize Fannie Mae and Freddie Mac, the two biggest providers of financing for U.S. home loans.

Australian 10-year government bonds gained for a seventh day, pushing the yield 1 basis point lower to 6.29 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.038, or A$0.38 per A$1,000 face amount, to 92.034. Bond yields move inversely to prices and a basis point is 0.01 percentage point.

To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net.