The Australian and New Zealand dollars advanced for a second day as investor appetite for higher-yielding assets improved after U.S. home sales revived and Barclays Plc said it won’t need further capital increases. The currencies gained along with stocks and commodity prices as a private survey of more than 400 companies in Australia showed that business confidence rose in December from a record low. Gains in the New Zealand dollar may be limited as economists expect policy makers to cut interest rates 1 percentage point to 4 percent when they meet Jan. 29. “Higher commodities and the Barclays news will add to positive sentiment and support the Aussie and the kiwi,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington, referring to the currencies by their nicknames. The New Zealand dollar will trade between 52.30 and 52.90 U.S. cents as expectations of a rate cut weigh on the currency, he said. Australia’s currency rose 0.7 percent to 66.27 U.S. cents as of 3:24 p.m. in Sydney from 65.82 cents late in Asia yesterday. The currency gained 0.8 percent to 59.32 yen. New Zealand’s dollar gained 0.4 percent to 52.85 U.S. cents from 52.62 in Asia yesterday. It bought 47.31 yen from 47.07. The Australian dollar advanced to NZ$1.2579, the highest since August against the kiwi, before trading at NZ$1.2536 from NZ$1.2508 yesterday. It may strengthen to NZ$1.26 over the next few days and rise as high as 66.30 U.S. cents today, Allen said. The Aussie may gain toward its July 2008 high against the kiwi, wrote New York-based Tom Fitzpatrick and London-based Shyam Devani, analysts at Citigroup Inc. in a research note dated Jan 26. The currency traded at NZ$1.2969 on July 24, the highest since December 2000. Higher Yield 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., attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits. Traders are betting the Reserve Bank of New Zealand will cut its benchmark rate at least 1 percentage point to 4 percent on Jan. 29, according to a Credit Suisse Group index based on overnight swaps. The chance of a bigger cut rose to 84 percent according to the index as New Zealand’s services industry contracted for a ninth straight month in December. The performance of services index was 48.0 from 47.3 in November, Bank of New Zealand Ltd. and Business New Zealand, a Wellington-based employer group, said in a statement today. Global Slowdown New Zealand’s dollar may fall below 50 U.S. cents for the first time since 2002 as a deepening global slowdown weighs on commodity prices, Jason Wong, head of investment strategy at AMP Capital Investors Ltd., said in Wellington today. The benchmark rate will fall to 3 percent or lower this year, said Wong, though New Zealand will need to “stand out to some extent so people lend to us to support our spending habits.” The Reserve Bank of Australia will lower its benchmark at least 75 basis points, with a 68 percent chance of a bigger cut, when it meet Feb. 3, a separate Credit Suisse index shows. Australian business confidence rose in December climbing 10 points to minus 20 from November, according to a National Australia Bank Ltd. survey released in Sydney today. That’s the 12th straight reading of less than zero, indicating companies expecting their industry to deteriorate outnumber those seeing an improvement. Lower-than-forecast consumer price data on Jan. 28 could raise expectations of a 1 percentage point cut by the RBA and push down the Australian currency, wrote a team of currency strategists at National Australia Bank Ltd. led by Sydney-based John Kyriakopoulos. The currency is likely to find support at 64 U.S. cents, with a smaller cut boosting it as high as 68.50 over the week, they wrote in a research note today. Stocks, Commodities Barclays rose 73 percent in London trading yesterday, the most in at least two decades, after saying in an open letter that the North American units acquired from Lehman Brothers Holdings Inc. are generating “record” revenue. The Australian and New Zealand currencies also gained as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials advanced for a second day. Gold, Australia’s third most-valuable raw material export, rose to its highest closing price in almost five months in New York. Raw materials account for 60 percent of Australia’s exports and 70 percent of New Zealand’s. Australian government bonds declined for the second day with the yield on the 10-year note rising 7 basis points, or 0.07 percentage point, to 4.17 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.556, or A$5.56 per A$1,000 face amount, to 108.856. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose for the first day in three to 3.49 percent from 3.42 yesterday.

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