Australia, New Zealand Dollars Advance on Chinese Stimulus Plan

By Candice Zachariahs

Nov. 10 (Bloomberg) -- The Australian and New Zealand dollars advanced after China pledged a $586 billion stimulus plan to prop up growth, prompting investors to buy currencies linked to emerging economies.

The currencies rose as China, the biggest contributor to global expansion, said it would use the funds by the end of 2010. Demand from emerging economies for commodities boosts the Australian and New Zealand dollars as raw material exports make up more than half of the nations' overseas shipments.

China's ``spending package has really given high-yielding, growth-sensitive currencies like the kiwi and the Aussie a boost,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington, referring to the currencies by their nicknames. ``I think currency markets will still watch equities to see where they go.''

Australia's currency rose 1.6 percent to 68.48 U.S. cents as of 8:14 a.m. in Sydney from 67.41 cents late in New York on Nov. 7. The currency advanced 2.5 percent to 67.85 yen.

New Zealand's dollar gained 1.2 percent to 59.83 U.S. cents from 59.12 in New York last week. It bought 59.21 yen from 58.08.

Separately, the Group of 20 nations called for interest-rate cuts and increased spending to support growth as the world's industrialized nations slump into recession.

The South Pacific nations' currencies gained after a statement from the G-20 yesterday indicating governments would act ``urgently'' to stabilize financial markets. Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows among their economies, Russian Finance Minister Alexei Kudrin said in an interview.

Crisis Intensifying

``Over the past two months, the global financial crisis has been intensifying daily,'' the Beijing-based State Council said Nov. 9 on its Web site announcing the stimulus package. ``In expanding investment, we must be fast and heavy-handed,'' it said. The central bank will pursue a ``moderately loose'' monetary policy, according to the statement.

Finance ministers and central bankers from the G-20 met this weekend in Sao Paulo to lay the groundwork for a Nov. 15 heads- of-state summit in Washington.

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