By Candice Zachariahs Dec. 10 (Bloomberg) -- The Australian and New Zealand dollars rose as regional stocks gained, fueling speculation investors will increase their holdings of higher-yielding assets. The Australian currency also strengthened after reports showed consumer confidence increased for a second month and home loan approvals gained in October for the first time in nine months. Gains in the Australian dollar were limited before a government report tomorrow that economists say will show the unemployment rate rose to a one-year high last month. “Markets have shown themselves to be resilient,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest bank. “The risks are that we see further waves of bad news and not just in the U.S.” Australia’s currency rose 0.8 percent to 66.04 U.S. cents as of 5:18 p.m. in Sydney, from 65.54 cents late in Asia yesterday. It advanced 0.6 percent against Japan’s currency to 61.17 yen. New Zealand’s dollar gained 0.9 percent to 54.61 U.S. cents, and climbed 0.8 percent to 50.59 yen. Gains in the Australian currency toward 66.50 cents and the New Zealand dollar toward 55 cents represent selling opportunities, Rennie said. Australian consumer confidence jumped 7.5 percent this month to 92 points, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers released today in Sydney. The index has been below 100 since February, which indicates pessimists outnumber optimists. Home-Loan Approvals The number of loans granted to build or buy homes and apartments in Australia rose 1.3 percent to 48,299 in October from the lowest level since 2001, the statistics bureau said. The median estimate of economists surveyed by Bloomberg News was for a 1 percent gain. The Reserve Bank of Australia has slashed interest rates 3 percentage points since early September in the most aggressive rate-cutting cycle since 1991 to boost spending as the economy slows. The unemployment rate will rise to 4.4 percent, the highest level since November 2007, from 4.3 percent, according to economists surveyed by Bloomberg before the statistics bureau report tomorrow. “Recent aggressive interest-rate cuts by the RBA, together with the government’s increased first-home owners’ grant should continue to provide some support to housing finance in the coming months,” Jo Heffernan and Amanda Tan, economists at St. George Bank Ltd. in Sydney, wrote in a research note today. Benchmark interest rates are 4.25 percent in Australia and 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 can erase profits. Shrinking Trade RBA Governor Glenn Stevens said yesterday economic growth slowed “more quickly than anyone had forecast” in China, the nation’s biggest trading partner. World trade volumes will probably contract next year by 2.1 percent, hampered by exchange-rate volatility, falling import demand and a decline in export financing, the World Bank said yesterday in its annual Global Economic Prospects report. New Zealand’s export volumes fell 2.3 percent in the third quarter as dairy shipments slumped to a four-year low, Statistics New Zealand said today in Wellington. RBC Capital Markets revised its forecast for the Australian dollar, saying the currency will reach a low of 55 U.S. cents in mid-2009, after previously forecasting it would bottom at 60 cents. New Zealand’s currency will reach a trough at 43 cents, Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney, wrote in a research note yesterday. Australian government bonds declined. The yield on the 10- year note rose 16 basis points to 4.47 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 1.335, or A$13.35 per A$1,000 face amount, to 106.357. A basis point is 0.01 percentage point. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.8 percent from 4.78 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

Source