By Candice Zachariahs Dec. 12 (Bloomberg) -- The Australian dollar touched a one- month high against the U.S. currency as Asian stocks gained this week by the most since 1998. New Zealand’s dollar also rose. Australia’s currency headed for a weekly gain after reports showed consumer confidence climbed for a second month and home loan approvals rose for the first time in nine months. Gains in the two South Pacific nations’ currencies may be limited as slowing global growth damps demand for commodities, said Besa Deda, acting chief economist and strategist at St. George Bank Ltd. in Sydney. The Australian dollar’s “advance has a lot to do with improvements in risk appetite,” Deda said. “I favor a weaker Aussie from here, particularly with Chinese data starting to worry policy makers and investors,” she said, referring to the currency by its nickname. Australia’s currency touched 68.01 U.S. cents, the highest level since Nov. 11, before trading at 66.95 cents at 1:07 p.m. in Sydney, from 66.38 cents late in Asia yesterday. It has risen 3.5 percent since closing at 64.67 cents in New York last week. The currency advanced 1.9 percent this week to 61.38 yen. New Zealand’s dollar gained 3.7 percent to 55.27 U.S. cents from last week in New York. It climbed 2.5 percent to 50.71 yen. The Australian and New Zealand dollars advanced as the greenback slumped against all of the 16 most-traded currencies after the cost of borrowing in dollars dropped, indicating weaker demand for year-end funding. They also gained as commodity prices headed for a record weekly gain. Tax Break Australian Prime Minister Kevin Rudd today announced a A$440 million ($295 million) tax break for small businesses, which employ 1.7 million people. He also said the government would spend an extra A$4.74 billion on projects such as railway lines to boost the economy. That would add to A$26 billion in stimulus plans announced to ease concerns the economy will slip into a recession. The Reserve Bank of Australia cut its benchmark rate by 3 percentage points since September to 4.25 percent. Economic growth has slowed “more quickly than anyone had forecast” in China, the nation’s biggest trading partner, Governor Glenn Stevens said this week. The World Bank is forecasting China’s economy will expand by 7.5 percent next year, the slowest pace since 1990. New Zealand’s dollar weakened against the yen today after a government report showed retail sales fell the most in more than four years in October as spending on cars declined. Sales dropped 1.3 percent from September when they rose 0.3 percent, seasonally adjusted, Statistics New Zealand said in Wellington. ‘Weak Report’ “Overall it is a weak report that supports the case for further monetary-policy easing,” Sydney-based Joshua Williamson, a senior strategist at TD Securities Ltd., wrote in a research note. The Reserve Bank of New Zealand lowered interest rates by a record 1.5 percentage points to 5 percent this month. Traders are betting Governor Alan Bollard will cut them by another 1 percentage point in the next 12 months to lift the domestic economy out of recession. Australian government bonds fell, pushing the yield on the 10-year note up six basis points to 4.34 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.539, or A$5.39 per A$1,000 face amount, at 107.479. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.73 percent from 4.79 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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