By Candice Zachariahs Dec. 17 (Bloomberg) -- Australia’s dollar rose to a two- month high and New Zealand’s currency gained after the Federal Reserve cut its target interest rate to as low as zero, spurring investors to purchase the nations’ higher-yielding assets. The two currencies advanced the most in almost seven weeks against the U.S. dollar after the Fed said it will “employ all available tools” to stimulate economic growth. Asian stocks advanced as the Fed’s announcement fueled speculation U.S. policy makers will take further measures to drag the world’s largest economy out of a recession. “It looks like the Fed is pulling out all the stops to re- fire its economy, which is good for growth,” said Greg Gibbs, director of foreign-exchange strategy at ABN Amro Australia Ltd. in Sydney. The Fed’s decision is “clearly U.S. dollar- negative” as the Australian and New Zealand dollars will benefit from the widening interest-rate differential. Australia’s currency rose as high as 70.25 U.S. cents, the strongest since Oct. 21, before trading up 4.2 percent at 69.81 U.S. cents as of 5:09 p.m. in Sydney, from late in Asia yesterday. The gain is the biggest since Oct. 30. The currency advanced 2.6 percent to 61.89 yen. New Zealand’s dollar gained 4.3 percent to 58.16 U.S. cents, after reaching 58.56 cents, the strongest since Nov. 11. It climbed 2.9 percent to 51.60 yen. The Australian dollar may rise toward 72 cents while New Zealand’s currency may advance to 60 cents in next few days, Gibbs said. Stocks Gain The two currencies strengthened for a third day versus the greenback and the MSCI Asia-Pacific index of regional stocks advanced to a five-week high after the Fed announced yesterday it lowered its target interest rate to between zero and 0.25 percent, from 1 percent. Investors should buy Australia’s dollar against Canada’s as it may rise more than 5 percent, New York-based Adam Fazio and Toronto-based Shane Enright, analysts at CIBC World Markets, wrote in a research note yesterday. “The market has been consistently supported at ever higher level, appearing to take on a new bullish bent,” Fazio and Enright said. A break above 85 Canadian cents, a 50 percent retracement from the Australian dollar’s July decline, would open up a gain to 88.15 cents, the 61.8 percent retracement, the analysts said, referring to a series of numbers known as the Fibonacci sequence. The Australian dollar rose 0.1 percent to 83.50 Canadian cents from yesterday in New York. Fibonacci analysis uses a mathematical formula based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of one indicates a currency may move to the next. A failure suggests a trend may stall. Annual Loss The Australian dollar has still fallen 22 percent against the dollar and 37 percent versus the yen this year as slumping commodities and a global recession prompted investors to sell the nation’s assets. New Zealand’s currency has fallen 25 percent and 41 percent against the dollar and yen, respectively. Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.3 percent in Japan and as low as zero in the U.S., attracting investors to the South- Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits. Australian government bonds advanced with the yield on the 10-year note falling 12 basis points, or 0.12 percentage point, to 4.14 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 1.019, or A$10.19 per A$1,000 face amount, at 109.2. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.67 percent from 4.75 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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