The Australian and New Zealand dollars extended gains from last week as improved risk appetite boosted demand for high-yielding assets. The currencies also climbed as prices advanced for commodities the nations export, including oil, wheat and beef. Crude oil climbed for a third day on intensifying conflict in the Middle East. U.S. stocks climbed to a two-month high on Jan. 2, following the market’s worst annual drop since the Great Depression, as General Motors Corp. got its first cash infusion from the government and rising oil prices lifted energy shares. “The Aussie and the Kiwi dollars have continued from their strong finish on Friday night due to an improved risk environment and some optimism for equity inflows,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “The deteriorating situation in Israel also has the potential to boost crude prices and markets are closely watching that.” Australia’s currency touched as high as 71.62 U.S. cents and traded at 71.38 cents as of 12:50 p.m. in Sydney, compared with 71.13 cents in late trading on Jan. 2 in New York. It rose to 65.72 yen from 65.35 last week. “An improvement in equity markets and risk appetites has likely spurred the Australian dollar higher,” Amanda Tan, an economist at St. George Bank Ltd. in Sydney, wrote today in a note to clients. The benchmark S&P/ASX 200 Index of Australian stocks rose 0.6 percent and the MSCI Asia Pacific Index gained 1.7 percent. Expectations Caught Up “In the short-term, we are in a period of improved risk appetite even though the U.S. economy is showing little signs of improving as market expectations have caught up with the real economy,” Rennie said. He forecasts the Australian dollar to rise to as high as 72 U.S. cents in the “next few days.” Crude oil touched $48.68 per barrel in after-hours electronic trading on the New York Mercantile Exchange, after Israeli troops crossed into the Gaza Strip over the weekend, escalating the 10-day old conflict and threatening stability in world’s largest oil-producing region. It traded at $46.88 at 9:50 a.m. in Singapore. Crude prices jumped 23 percent last week, the most since August 1986, as the conflict in Gaza increased concern that Middle East supplies would be cut and Russia curbed natural-gas shipments to Ukraine. The Reuters/Jefferies CRB Index of 19 raw materials climbed 8.7 percent last week, its first gain in three weeks. New Zealand’s dollar rose to as high as 59.18 U.S. cents from 58.58 cents in New York before trading at 59.02 U.S. cents. It was at 54.31 yen from 53.78 yen. The kiwi, as it is often called, may gain to no more than 60 cents to the U.S. currency “as it could see some renewed selling pressure there,” Rennie said. Commodities Exports Commodities including coal, iron ore, gold and oil account for 60 percent of Australia’s export revenue. New Zealand relies on raw materials including milk and timber for 70 percent of its overseas shipments. Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., helping draw funds to the higher- yielding currencies. Australian government bonds fell. The yield on the 10-year note climbed 16 basis points, or 0.16 percentage point, to 4.12 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 1.44, or A$14.40 per A$1,000 face amount, to 109.29. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was down 1.5 basis points to 4.3 percent.

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