By Candice Zachariahs Nov. 10 (Bloomberg) -- The Australian and New Zealand dollars advanced after China pledged to spend $586 billion to prop up growth, prompting investors to buy currencies linked to emerging economies. The currencies rose for the first time in three days as China, the biggest contributor to global expansion, said it would use the funds by the end of 2010. Demand from emerging economies for commodities boosts the Australian and New Zealand dollars as raw material exports make up more than half of the nations' overseas shipments. China's ``spending package has really given high-yielding, growth-sensitive currencies like the kiwi and the Aussie a boost,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington, referring to the currencies by their nicknames. ``People aren't sure whether we're going to see a deep and prolonged recession or not. We've had good news from China.'' Australia's currency rose 2.1 percent to 68.81 U.S. cents as of 1:59 p.m. in Sydney from 67.41 cents late in New York on Nov. 7. The currency advanced 3 percent to 68.21 yen. New Zealand's dollar gained 1.5 percent to 59.99 U.S. cents from 59.12 in New York last week. It bought 59.46 yen from 58.08. Separately, the Group of 20 nations called for interest- rate cuts and increased spending to support growth as the world's industrialized nations slump into recession. The South Pacific nations' currencies gained after a statement from the G-20 yesterday indicated governments would act ``urgently'' to stabilize financial markets. Brazil, Russia, India and China, the so-called BRIC nations, will plan coordinated measures to increase trade and capital flows among their economies, Russian Finance Minister Alexei Kudrin said in an interview. Crisis Intensifying ``Over the past two months, the global financial crisis has been intensifying daily,'' the Beijing-based State Council said Nov. 9 on its Web site announcing the stimulus package. ``In expanding investment, we must be fast and heavy-handed,'' it said. The central bank will pursue a ``moderately loose'' monetary policy, according to the statement. The Australian dollar will be an ``obvious beneficiary'' as China's efforts support the resources sector, said Ray Attrill, Sydney-based global research director at Forecast Ltd. in an interview on Bloomberg Television. ``Infrastructure spending is the way this package could prevent China from suffering a hard landing.'' Growth Forecast Policy makers in Australia signaled that they were prepared to add to the most aggressive interest-rate cuts in 17 years as data showed home-loan approvals fell in September for an eighth month. The Reserve Bank of Australia cut its 2008 economic growth forecast to 1.5 percent from 2 percent and said it was forced to make ``unusually large'' reductions in its target rate in October and November, in its quarterly policy statement released in Sydney. Traders are betting that the central bank will slash interest rates by 75 basis points to 4.5 percent on Dec. 2, according to a Credit Suisse index based on overnight swaps trading. There is a 55 percent chance of a 1 percentage point cut, according to the index. Benchmark interest rates are 5.25 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 in so-called carry trades. The risk in such trades is that currency market moves will erase profits. Cutting Bets Futures traders decreased their bets that the Australian currency will decline against the U.S. dollar, 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 decline in the Australian dollar compared with those on a gain -- so-called net shorts -- was 5,513 on Nov. 4, compared with 9,819 a week earlier. Australian government bonds were little changed, with the yield on the 10-year note at 5.191 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 was lower by 0.042, or A$0.42 per A$1,000 face amount, at 100.46. New Zealand's two-year swap rate, a fixed payment made to receive floating rates, advanced to 5.95 percent from 5.93 on Nov. 7. ----With reporting by Catherine Yang in Hong Kong and Jacob Greber in Sydney. Editors: Garfield Reynolds, Tim Smith. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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