Australian Dollar Rises as Commodities Gain; N.Z. Dollar Climbs

By Ron Harui and Tracy Withers

Aug. 20 (Bloomberg) -- The Australian dollar rose as prices of commodities increased, bolstering the outlook for the nation's export earnings. The New Zealand dollar strengthened.

Australia's dollar also gained versus the yen as the Reuters/Jeffries CRB Index of 19 raw materials climbed for a second day. Australia's currency was supported by speculation its 10 percent drop over the past month was too rapid. The New Zealand dollar advanced on prospects a slowing U.S. economy will deter the Federal Reserve from raising interest rates, keeping the allure of the nation's higher-yielding assets.

``The Australian dollar sell-off appears to be stalling, if only because it is so over-extended,'' Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney, wrote in a research note. Commodity prices will ``hold well above previous long-term averages. This argues for the Australian dollar to find support above long-term averages.''

The Australian dollar climbed 0.5 percent to 87.29 U.S. cents as of 10:46 a.m. in Sydney from 86.88 cents late in Asia yesterday. It has gained 1.5 percent since reaching 85.93 cents on Aug. 13, the lowest since Jan. 23. The currency strengthened 0.6 percent to 95.89 yen from 95.33 yen.

The New Zealand dollar advanced 0.6 percent to 71.45 U.S. cents from 71.04 cents late in Asia yesterday. It has risen 4.7 percent since touching 68.26 cents on Aug. 13, the lowest since Aug. 17, 2007. The currency appreciated 0.7 percent to 78.52 yen from 77.95 yen.

The CRB Index has fallen 12.6 percent to 388.51 since the Australian dollar's 25-year high of 98.49 cents on July 16.

Best Performer

The Australian dollar is highly influenced by raw material prices because overseas shipments of commodities account for about 17 percent of the country's economy. Gold, Australia's third-most valuable commodity export behind iron ore and coal, gained for a third day to trade at $817.31 an ounce.

The New Zealand dollar rose as U.S. builders broke ground on the fewest new homes in 17 years in July, prompting traders to add to bets the Fed will delay increasing borrowing costs.

New Zealand's dollar is the best performer among the 16 most-active currencies against the U.S. dollar in the past week on speculation investors will seek higher returns in the South Pacific nation. The benchmark interest rate is 8 percent in New Zealand, compared with 2 percent in the U.S.

``The U.S. dollar suffered from poor housing data,'' said Khoon Goh, senior markets economist at ANZ National Bank Ltd. in Wellington. ``It is not surprising to see the New Zealand dollar gaining ground.''

Government Bonds

U.S. housing starts fell in July to an annual rate of 965,000, the lowest since March 1991, the Commerce Department said yesterday. Futures on the Chicago Board of Trade show a 20 percent chance the Fed will raise its benchmark rate by at least a quarter-percentage point by its Dec. 16 meeting, down from 37 percent odds a week earlier.

Australian and New Zealand government bonds were little changed. The yield on Australia's 10-year note was at 5.82 percent and New Zealand's 6.18 percent. The three-year yield was at 6.24 percent. Yields move inversely to prices.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net