By Candice Zachariahs
Nov. 26 (Bloomberg) -- The Australian and New Zealand dollars advanced for a third day as the U.S. Federal Reserve committed $800 billion to unfreeze credit markets, prompting speculation that investors will buy higher-yielding assets.
The currencies touched the highest in more than a week against the dollar after the U.S. announced a program to support lending to homebuyers, consumers and small businesses, reducing demand for the greenback as a safe haven.
“We’ve had a big move overnight on the back of the Federal Reserve announcement and the Aussie has come off a little bit since,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “If we can hold above 63.15 cents, we’re still in a rally phase,” and the Australian dollar may advance towards 70 cents this week, she said.
Australia’s currency rose 2.2 percent to 65.10 U.S. cents as of 8:12 a.m. in Sydney from 63.68 cents late in Asia yesterday. It earlier touched 66.17 cents, the highest since Nov. 14. The currency advanced 1.7 percent to 62 yen.
New Zealand’s dollar gained 1.8 percent to 54.74 U.S. cents from 53.79 cents in Asia yesterday. The currency reached 55.88 cents earlier, the strongest since Nov. 18. It bought 52.16 yen from 51.51.
The currencies pared earlier gains as U.S. stocks drifted between gains and loses as technology shares declined amid a weaker outlook for growth.
Benchmark interest rates are 5.25 percent in Australia and 6.5 percent in New Zealand, compared with 0.3 percent in Japan and 1 percent in the U.S., attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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