The Australian dollar rose, heading for a sixth weekly gain versus the greenback, as the extra yield offered by the South Pacific nation’s bonds widened amid signs the world’s largest economy is slowing. Australia’s currency was poised for the longest weekly winning streak since September 2009 as the spread between two- year yields in Australia and the U.S. was near the largest in two years. Economists said U.S. reports today and next week will show orders for durable goods dropped and consumer confidence fell. New Zealand’s dollar slid for a second day versus the Aussie on concerns the smaller nation’s economy is slowing. “Declining yields in the U.S. will boost the yield advantage of Australian debt over U.S. securities,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd. “This will give a key catalyst for the Aussie.” Australia’s dollar traded at 95.03 U.S. cents as of 4:43 p.m. in Sydney from 94.89 cents in New York yesterday, having gained 1.5 percent this week. The currency climbed to 96 cents on Sept. 22, the strongest since July 2008. The so-called Aussie was at 80.53 yen from 80.08 yen. New Zealand’s currency bought 72.91 U.S. cents from 72.92 cents, poised for a 0.5 percent advance this week. The currency was at 61.79 yen from 61.54 yen. The so-called kiwi was near a five-month low against Australia’s dollar as the yield advantage of New Zealand’s 10- year bonds dropped yesterday to the least since July 2009. The New Zealand dollar slid to NZ$1.3032 per Australian dollar, from NZ$1.2904 last week, after touching NZ$1.3082 yesterday, the weakest since April 21. Spread Widens U.S. bookings for goods meant to last at least three years fell 1 percent, the biggest drop in a year, according to the median forecast of economists surveyed by Bloomberg News ahead of today’s data. The Conference Board’s confidence index slumped to 52.5 in September from 53.5 the previous month, according to a Bloomberg survey before the Sept. 28 report. The yield on the two-year Treasury fell two basis points to 0.42 percent yesterday, after declining to a record low of 0.41 percent on Sept. 22. The extra return investors get for investing in two-year Australian debt compared with similar- maturity U.S. Treasuries increased to 4.42 percentage points yesterday, the most since June 2008. Interest Rates Benchmark interest rates of 4.5 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and close to zero in the U.S., attract investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. Minutes from the Reserve Bank of Australia’s meeting this month showed policy makers said higher interest rates may be needed to cope with the nation’s economic expansion. The RBA raised borrowing costs in six, quarter-percentage-point steps from October to May. In contrast, the Federal Reserve said this week it’s willing to ease monetary policy further to spur growth and support prices. Gains in the so-called Aussie were limited as Asian stocks extended a downturn in global equities, sapping demand for higher-yielding currencies and as speculation surfaced that the recent gain in the South Pacific nation’s currency was overdone. “Our short-term model’s fair value band for the Aussie dollar-U.S. dollar is 96.00 cents,” said John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. “We will likely need to see further improvements in its drivers such as risk-appetite to break above this level.” N.Z. Economy New Zealand’s dollar fell after a government report yesterday showed the economy grew 0.2 percent in the second quarter from the prior three months, compared with the median forecast for 0.7 percent growth in a Bloomberg survey of economists. Australian bonds rose, with the yield on the benchmark 10- year note falling five basis points to 5.06 percent, according to data compiled by Bloomberg. The yield on New Zealand’s 10- year bonds fell two basis points to 5.13 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell two basis points to 3.71 percent. To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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