Australian, New Zealand Dollars Advance as Regional Stocks Rise

By Candice Zachariahs

Dec. 10 (Bloomberg) -- The Australian and New Zealand dollars advanced as regional equities gained, prompting speculation investors will buy higher-yielding assets.

The currencies rose as Australian and Japanese stocks jumped and a report showed Australian consumer confidence increased in December for a second month.

“Markets have shown themselves to be resilient,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. “The risks are that we see further waves of bad news and not just in the U.S.” Gains in the Australian dollar towards 66.50 cents and in the New Zealand currency towards 55 cents are selling opportunities, Rennie said.

Australia’s currency rose 0.6 percent to 65.92 U.S. cents as of 11:26 a.m. in Sydney from 65.54 cents late in Asia yesterday. The currency advanced 0.3 percent to 60.97 yen.

New Zealand’s dollar gained 0.2 percent to 54.23 U.S. cents from 54.15 in Asia yesterday. It bought 50.13 yen from 50.19.

A sentiment index in Australia jumped 7.5 percent to 92 points, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted between Dec. 1 and Dec. 7 and released today in Sydney. The index has since February held below 100, which indicates pessimists outnumber optimists.

Reserve Bank of Australia Governor Glenn Stevens said yesterday that economic growth slowed “more quickly than anyone had forecast” in China, the nation’s biggest trading partner.

RBC Capital Markets revised its forecast for the Australian dollar, saying the currency will reach a low point of 55 U.S. cents in mid-2009, after previously forecasting it would bottom at 60 cents. New Zealand’s currency will reach a trough at 43 cents, wrote Sydney-based Sue Trinh, a senior currency strategist with RBC Capital Markets, in a research note yesterday.

Benchmark interest rates of 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.3 percent in Japan and 1 percent in the U.S., attract some investors to the South Pacific nations’ assets using funds borrowed in yen. 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