Australian, N.Z. Dollars Strengthen as Stocks, Commodities Gain

By Ron Harui

Jan. 14 (Bloomberg) -- The Australian and New Zealand dollars rose against Japan’s currency, rebounding from one-month lows, as stock gains and higher commodities prices spurred demand for higher-yielding assets.

The currencies snapped four-day losing streaks versus the yen after government reports today showed home-building approvals in Australia and New Zealand increased in November, suggesting interest-rate cuts are helping combat slowdowns in the two nations’ economies.

“With equity and commodity markets steady, we are expecting the Aussie to find some support after its recent slide,” said Nick Jonas, a Brisbane-based treasury analyst at Suncorp-Metway Ltd., referring to Australia’s currency by its nickname.

Australia’s dollar rose to 67.44 U.S. cents as of 1:25 p.m. in Sydney from 67.03 cents late in Asia yesterday. It touched 65.76 cents, the lowest level since Dec. 12. The currency climbed to 60.36 yen from 59.78 yen, after sliding to 58.55 yen.

New Zealand’s dollar advanced to 55.53 U.S. cents from 55.45 cents in Asia yesterday. It earlier fell as low as 54.62 cents, the weakest since Dec. 15. The currency strengthened to 49.71 yen from 49.44 yen.

The MSCI Asia-Pacific Index of regional shares gained 1.4 percent, after sliding 7 percent in the previous four days. The Reuters/Jeffries CRB Index of 19 raw materials advanced 0.7 percent yesterday, after a 4.1 percent drop on Jan. 12.

‘Recovering’

“The Aussie is recovering and the New Zealand dollar is off its lows as commodity prices are a bit higher,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore.

Crude oil for February delivery climbed 2.8 percent to $38.85 a barrel, and gold rose 0.1 percent to $823.09 an ounce. Commodities including coal, iron ore, gold and oil account for 60 percent of Australia’s export revenue. New Zealand relies on raw materials including milk and timber for 70 percent of its overseas shipments.

The Reserve Bank of Australia reduced its benchmark rate by three percentage points last year to a match a record low of 4.25 percent in the most aggressive monetary-policy easing since 1991. The Reserve Bank of New Zealand cut its key rate in 2008 by 3.25 percentage points to 5 percent.

Australia’s dollar ended two days of losses versus the greenback as the number of loans granted to build or buy homes and apartments in Australia rose a higher-than-expected 1.3 percent in November from October, when they advanced a revised 1.4 percent, the statistics bureau said in Sydney.

Record Low

New Zealand’s dollar advanced after building permits climbed 4.3 percent from a record low in October, when they fell 20 percent, Statistics New Zealand said in Wellington, citing seasonally adjusted figures.

The currencies earlier fell to the lowest in more than four weeks against the dollar and the yen on concern the U.S. credit crisis will deepen. The Federal Home Loan Bank of Seattle said it will suspend dividends and “excess” stock repurchases, becoming the second of the government-chartered lending cooperatives to say its capital may be running low.

“The FHLB news is a worry for the financial markets and is likely to cause risk aversion,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s second-largest bank by market value. “The bias is for the yen to be bought against high-yielding currencies.”

Capital Shortfall

The Seattle bank’s likely capital shortfall as of Dec. 31 was caused by “unrealized market value losses” on residential mortgage bonds without government backing, the company said in a U.S. Securities and Exchange Commission filing yesterday. It joins the San Francisco Federal Home Loan Bank in taking steps to guard its reserves after the U.S. housing market collapse sent mortgage-backed bonds tumbling.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits. The benchmark rate is 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S.

Financing costs in Australia rose. The difference between the rate Australian banks charge each other for three-month loans and the overnight swap rate climbed to 60.3 basis points from 59.5 basis points yesterday. The gauge, a measure of cash scarcity, averaged 11 basis points in the five years before the credit crunch started in August 2007.

Australian Bonds

Australian two-year government bonds were little changed after the yield reached 2.6 percent, the lowest since Dec. 15.

“Global investors are buying Australian bonds amid heightened expectations for further central-bank rate cuts,” said Yoshisada Ishide, a fund manager who oversees the equivalent of $1.5 billion at Daiwa SB Investments Ltd. in Tokyo. “This rally is likely to continue in the short term.”

Two-year yields may decline to 2.4 percent and 10-year yields may fall to 3.9 percent this week, from 3.98 percent today, Ishide said.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 3.81 percent from 4 percent late in Asia yesterday.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.