Australian, N.Z. Dollars Gain as U.S. May Raise Citigroup Stake

By Candice Zachariahs

Feb. 23 (Bloomberg) -- The Australian and New Zealand dollars rose as investors sold the U.S. currency on speculation President Barack Obama’s government will increase its ownership of Citigroup Inc.

The Australian dollar also strengthened against the yen as Japan’s deteriorating economy prompted investors to sell the low-yielding currency. Citigroup is in talks with federal officials that may increase state ownership of the bank to as much as 40 percent, the Wall Street Journal reported, citing people familiar with the situation it didn’t identify.

“We’re in for a fairly aggressive down-move in the U.S. dollar across the board,” said Paul Milton, chief foreign- exchange dealer at Societe Generale Australia Ltd. in Sydney. “I can’t see any reason why the Aussie can’t go back to the 66 U.S. cent-level over the next couple of days on the back of weak dollar sentiment,” he said, referring to the currency by its nickname.

Australia’s currency rose 0.8 percent to 65.01 U.S. cents as of 2:25 p.m. in Sydney from 64.53 cents in New York late last week. The currency advanced 0.3 percent to 60.44 yen.

New Zealand’s dollar gained 0.3 percent to 51.32 U.S. cents from 51.14 from Feb. 20. It bought 47.74 yen from 47.70. The so- called kiwi may bounce to 55 U.S. cents, Milton said.

New Zealand’s currency fell earlier as ANZ National Bank Ltd. said the nation’s economy may contract about 3 percent this year and the jobless rate may advance to a 15-year high. ANZ National, the nation’s biggest lender, said the New Zealand dollar will slump to 41 U.S. cents by the fourth quarter as the currency acts as “the release valve for the economy.”

Futures Traders

Futures traders increased bets the Australian dollar will decline against the U.S. currency, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a drop in the Australian currency compared with those on a gain -- so-called net shorts -- was 7,290 on Feb. 17, compared with net shorts of 5,848 a week earlier.

The extra yield Australian states pay to borrow compared with the federal government rose by the most in 10 weeks after Standard & Poor’s cut Queensland state’s rating on Feb. 20. The premium the state pays on 2013 debt over the Australian government rose 22 basis points to 122 basis points, the biggest jump since Dec. 10. The spread for New South Wales 2014 notes added 15 basis points. A basis point is 0.01 percentage point.

Australian government bonds rose. The yield on the benchmark 10-year note fell three basis points to 4.14 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.256, or A$2.56 per A$1,000 face amount, to 109.06. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.29.

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