Australian Dollar Trades Near 25-Year High as Commodities Rally

By Candice Zachariahs

July 22 (Bloomberg) -- The Australian dollar traded near a 25-year high after prices of commodities that the nation exports advanced following five days of declines.

The currency halted a three-day loss yesterday after gold, Australia's third most valuable raw material export, rallied as rising energy prices boosted demand for the metal as a hedge against inflation. The local dollar rose to its highest since 2000 against the New Zealand currency before an inflation report tomorrow that may support the case for the Reserve Bank of Australia keeping interest rates at a 12-year high.

``Generally with all commodities doing better overnight, that's helped the Australian dollar,'' said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia's fourth-biggest lender.

Australia's currency was little changed at 97.63 U.S. cents at 9:13 a.m. in Sydney, from 97.66 cents in late Asian trading yesterday. It reached 98.49 cents on July 16, the highest level since 1983. It bought 103.96 yen from 104.21.

The consumer price index rose 1.3 percent in the second quarter for an annual gain of 4.3 percent, up from 4.2 percent in the previous three months, according to the median estimate of 22 economists surveyed by Bloomberg News. The Bureau of Statistics releases the figures at 11:30 a.m. in Sydney tomorrow.

The producer price index rose by a less-than-forecast 1 percent in the second quarter, a report showed yesterday.

Seven-Year High

The currency touched NZ$1.2851, the strongest level since December 2000, before trading at NZ$1.2830 from NZ$1.2805.

The benchmark rate is 7.25 percent in Australia and 8.25 percent in New Zealand. Investors have increased bets over the past month that the Reserve Bank of New Zealand will reduce rates for the first time since 2003 when it meets July 24.

Australian government bonds rose, pushing the yield on the 10-year bond down 1 basis points to 6.42 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.04, or A$0.40 per A$1,000 face amount, to 91.106. 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.