By Candice Zachariahs
Dec. 22 (Bloomberg) -- The Australian and New Zealand dollars rose on speculation the U.S. government’s bailout of automakers will give investors confidence to purchase higher- yielding assets.
The currencies gained against the yen as regional equities advanced after the U.S. agreed to lend General Motors Corp. and Chrysler LLC $13.4 billion in emergency funds and the Federal Reserve expanded a program to revive consumer credit. New Zealand reports third-quarter gross domestic product data tomorrow, which economists forecast will show the nation’s recession deepened.
“There’s been a stabilization in the market, largely with the U.S. agreeing to the auto bailout and an enhancement of plans to stimulate consumer credit,” said Imre Speizer, a market strategist in Wellington with Westpac Banking Corp.
Australia’s currency rose 0.1 percent to 68.17 U.S. cents as of 4:17 p.m. in Sydney from 68.09 cents late in New York last week. The currency advanced 0.7 percent to 61.24 yen. The Australian dollar may rise to 71 cents this week, Speizer said.
New Zealand’s dollar gained 0.4 percent to 57.69 U.S. cents after trading in New York at 57.45 cents on Dec. 19. It bought 51.85 yen from 51.30.
New Zealand’s dollar may rally to 61 cents, if it holds above 57 cents through tomorrow, Speizer said.
Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.
Holiday Trading
GDP in New Zealand contracted 0.5 percent in the third quarter from the previous three months, prolonging the nation’s first recession since 1998, according to the median estimate of 13 economists surveyed by Bloomberg News. The report is due at 10:45 a.m. tomorrow in Wellington.
Movements in the currencies may be exaggerated by thin trading leading into the Christmas and New Year holidays, Speizer said.
New Zealand’s current-account deficit widened to a record in the year through September as a weakening currency increased the cost of imports. The gap widened to NZ$15.51 billion ($8.9 billion) in the 12 months ended Sept. 30 from a revised NZ$14.98 billion in the year through June 30, Statistics New Zealand said in Wellington today.
Current-Account Deficit
Investors should buy the Australian dollar versus New Zealand’s currency as “New Zealand is likely to be hugely dependent on dwindling foreign capital to help fund its still sizable current-account deficit,” a team of Citigroup strategists led by Jim McCormick, London-based global head of foreign exchange and local-markets strategy, wrote in a research note dated Dec. 19.
Westpac’s Speizer forecasts the Australian dollar will strengthen to NZ$1.2000 this week and break through NZ$1.2300 over the next month. The currency bought NZ$1.1807 from NZ$1.1840 late on Dec. 19 in New York.
Futures traders decreased bets that the Australian dollar will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop in the currency compared with those on a gain -- so-called net shorts -- was 4,199 on Dec. 16, compared with net shorts of 4,452 a week earlier.
Commodities Slump
The Australian dollar dropped 22 percent against the greenback in 2008 and 37 percent versus the yen as slumping commodities and a global recession prompted investors to pare holdings of the nation’s assets. New Zealand’s currency declined 25 percent versus its U.S. counterpart and 39 percent against the yen.
Raw materials account for 60 percent of Australia’s exports and 70 percent of New Zealand’s overseas shipments.
Australian government bonds declined. The yield on the 10- year note advanced 10 basis points, or 0.1 percentage point, to 4.13 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.928, or A$9.28 per A$1,000 face amount, at 109.247.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped to 4.57 percent from 4.60 on Dec. 19.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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