Australian, New Zealand Dollars Rise as U.S. Equities Advance

By Candice Zachariahs

Dec. 3 (Bloomberg) -- The Australian and New Zealand dollars rose as U.S. equities advanced, prompting speculation that investors will purchase higher-yielding assets.

The currencies edged higher as U.S. stocks rebounded from the market’s worst tumble since October. Gains in New Zealand’s dollar may be limited before a central bank meeting where policy makers are forecast to lower the benchmark rate by a record 1.5 percentage points.

“The market is taking its cue from equities, which have the occasional bear-market bounce,” said Imre Speizer, a market strategist in Wellington with Westpac Banking Corp. “The overriding trend is still clearly downwards.”

Australia’s currency was little changed at 64.51 U.S. cents as of 8:11 a.m. in Sydney from 64.52 cents late in Asia yesterday. The currency advanced 0.2 percent to 60.19 yen.

New Zealand’s dollar gained 0.1 percent to 53.47 U.S. cents from 53.39 in Asia yesterday. It bought 49.88 yen from 49.72.

The currencies will trade with a “weak tone” today, said Speizer, ahead of the Reserve Bank of New Zealand’s interest rate decision at 9 a.m. on Dec. 4 in Wellington. The Australian dollar will buy between 63.30 and 65 U.S. cents, while New Zealand’s currency will trade in a range of 52.5 to 53.5 cents, he said.

The currencies advanced today as General Electric Co., the biggest maker of jet engines and power plant turbines, announced plans to maintain its dividend and the Federal Reserve said it would extend three emergency loan programs.

Benchmark interest rates are 4.25 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.

New Zealand’s central bank will lower its benchmark to 5 percent tomorrow, according to 11 of 17 economists surveyed by Bloomberg News. Six say Bollard will lower the rate by 1 percentage point.

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