By Yasuhiko Seki June 22 (Bloomberg) -- Australia’s dollar advanced for a fourth day after China’s central bank strengthened its daily reference rate for the yuan by the most in five years, spurring investors to buy higher-yielding assets. The currency reversed an earlier decline after the decision by the People’s Bank of China boosted confidence the global economic recovery is gaining traction. New Zealand’s dollar traded near a one-month high against the greenback after a survey showed economists increased their forecast for the nation’s gross domestic product growth. “The rate action shows the Chinese government’s confidence in a sustained recovery,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank. “The move boosted demand for commodity currencies tied closely to growth in China, such as Australia’s.” Australia’s dollar rose to 87.92 U.S. cents as of 1:13 p.m. in Sydney from 87.65 cents in New York yesterday, when it advanced to 88.59, the strongest since May 17. The currency was at 79.99 yen from 79.85 yen. New Zealand’s dollar traded at 70.90 U.S. cents from 70.82 cents yesterday, when it climbed to 71.53 cents, the strongest since May 14. It was at 64.50 yen from 64.52 yen. China’s central bank said on June 19 it would allow greater currency “flexibility,” while maintaining the trading band, curbing inflows of short-term speculative capital and preventing “excessive” fluctuations. Yuan Fluctuations Gains in the two South Pacific currencies were tempered as the yuan weakened after it began trading, falling 0.2 percent to 6.8095 versus the dollar “Fluctuations of the yuan dominated the market as well as the direction of cross currencies,’” said Hiroshi Maeba, deputy general manager of foreign-exchange trading in Tokyo at Nomura Securities Co., Japan’s biggest securities broker. The so-called kiwi was boosted after a survey by the New Zealand Institute of Economic Research Inc. found economists forecast New Zealand’s GDP would grow in excess of 3 percent over the next two years on stronger international demand for the nation’s commodities. The economy will grow by 3.2 percent in the year ending March 31, 2011, according to the average estimate of 10 economists surveyed by the Wellington-based company. Three months ago, they forecast a 3.1 percent expansion. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell three basis points to 4.32 percent. Australian government bonds rose. The yield on the benchmark 10-year note fell four basis points to 5.40 percent, according to data compiled by Bloomberg. The 4.5 percent security due April 2020 gained 0.26, or A$2.60 per A$1,000 face amount, to 93.19. To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.

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