Australian, New Zealand Dollars Gain as Risk Appetite Improves

By Candice Zachariahs

Oct. 21 (Bloomberg) -- The Australian and New Zealand dollars rose for a third day after U.S. stocks gained, prompting investors to buy higher-yielding assets.

The currencies advanced against the yen and the U.S. dollar as prices increased for commodities exported by the nations and a gauge that measures risk aversion dropped from a record to the lowest in almost two weeks.

``We've got a much better stock market, so for the Aussie that's a clear improvement in risk conditions,'' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group in Sydney, referring to the currency by its nickname. ``The Aussie was heavily oversold as a reaction to intense risk aversion and downgrades to local growth, and now we're starting to see a reversal.''

The Australian dollar rose 0.6 percent to 70.46 U.S. cents as of 8:20 a.m. in Sydney, from 70.03 cents late in Asian trading yesterday. New Zealand's dollar gained 0.8 percent to 62.22 cents from 61.73 cents.

Australia's dollar gained 0.5 percent to 71.81 yen, from 71.46 yesterday. New Zealand's currency rose to 63.41 yen from 62.98 yesterday.

The currencies advanced as the VIX volatility index, a gauge reflecting expectations for stock-market price changes and risk appetite, fell to 52.97 yesterday from a record 70.33 on Oct. 17. U.S. stocks rose, after Halliburton Co., the world's second-largest oilfield-services provider, announced profits that topped estimates and Federal Reserve Chairman Ben S. Bernanke endorsed an additional economic stimulus package.

The Australian and New Zealand dollars were higher as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials gained for a second day. Raw materials make up 60 percent of Australia's exports and 70 percent of New Zealand's.

The Reserve Bank of Australia will release the minutes from its Oct. 7 board meeting today and Governor Glenn Stevens will speak later in the day in Sydney. The bank cut its benchmark rate 1 percentage point to 6 percent at that meeting, the biggest reduction since the 1992 recession.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net