By Candice Zachariahs Dec. 4 (Bloomberg) -- The Australian and New Zealand dollars advanced as investors speculated central bank interest-rate cuts around the world will bolster economic growth. The currencies pared gains after Asian stocks and U.S. index futures slumped and as a report showed Australian home-building approvals dropped in October to the lowest level since 2001. New Zealand’s dollar gained as the central bank slashed interest rates a record 1.5 percentage points to 5 percent to lift the country out of recession. The central banks for Europe, the U.K. and Sweden are set to announce rate decisions today. “The Aussie is going to tread this 63.5 to 65 cent range until the ECB and Bank of England decisions,” said Besa Deda, acting chief economist and strategist at St. George Bank Ltd. in Sydney. “Bigger rate cuts might help the Aussie, since that means a better chance of recovery in those economies.” Australia’s currency, known as the Aussie, rose 0.5 percent to 64.46 U.S. cents as of 4:18 p.m. in Sydney from 64.14 cents in Asia yesterday. The currency bought 59.99 yen from 59.65 yen. New Zealand’s dollar gained 0.5 percent to 53.07 U.S. cents from 52.83 late in Asia yesterday. It advanced 0.5 percent to 49.38 yen from 49.12 yen. Reserve Bank of New Zealand Governor Alan Bollard cited “the marked deterioration in the outlook for global growth,” for taking the benchmark to its lowest since December 2003. Eleven of 17 economists surveyed by Bloomberg News forecast the move. Bollard has cut rates by 3.25 percentage points since July. No Surprise “The market wasn’t surprised by the Reserve Bank’s actions or their general sentiment,” said Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. “It’s all about risk and the big barometer on that front is what’s happening across global equities.” Interest rates in New Zealand will fall to 3.5 percent by April next year, Bagrie said. Commonwealth Bank of Australia now forecasts the kiwi, as the currency is called, will decline to a low of 48 U.S. cents in the first quarter, before advancing to 65 cents by end 2009. CBA is one of four institutions that expects the currency to fall below 50 cents in the first quarter among 36 polled and previously forecast a bottom at 55 cents in March 2009. “We see large downside risks to their economic forecasts and expect significant cuts to the cash rate,” wrote Joseph Capurso and Richard Grace, Sydney-based CBA currency strategists. Investors are betting that European Central Bank policy makers, meeting in Brussels today, will lower the benchmark lending rate by at least 75 basis points to 2.5 percent, the biggest single reduction ever, Eonia forward contracts show. The Bank of England may cut rates by one percentage point to 2 percent according to the median forecast of 60 economists in a Bloomberg News survey. The Reserve Bank of Australia lowered its cash rate one percentage point to 4.25 percent on Dec. 2. Interest Rates Higher interest rates, compared with 0.3 percent in Japan and 1 percent in the U.S., attracted investors to high-yielding assets like those of Australia and New Zealand. The risk in such trades is that currency market moves will erase profits. The number of permits granted in Australia to build or renovate houses and apartments fell 5.4 percent from September, when they declined 5.9 percent, the Bureau of Statistics said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg News was for no change. A separate report showed the nation posted a record trade surplus in October. Australian government bonds rose. The yield on the 10-year note declined 8 basis points, or 0.08 percentage point, to 4.26 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 advanced 0.672, or A$6.72 per A$1,000 face amount, to 108.173. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.86 percent. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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