The Australian dollar touched a two- week high against the yen after Reserve Bank Governor Glenn Stevens said inflation “bears careful watching,” easing speculation the central bank will cut interest rates. The so-called Aussie rose against all of its 16 major peers as traders cut bets that the Reserve Bank of Australia will reduce borrowing costs. The New Zealand dollar snapped a two-day decline against the greenback after TD Securities Inc. said the nation will continue to benefit from China’s growth through dairy exports. “Stevens’ comments suggest the central bank hasn’t abandoned its tightening bias, spurring buying of the Aussie because it’s been sold as the market priced in rate cuts,” said Teppei Ino, an analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “The strength of New Zealand’s exports is that demand for their dairy products doesn’t fall even when there is concern about a global economic slowdown.” Australia’s dollar climbed to 81.06 yen as of 1:37 p.m. in Sydney from 80.81 yesterday in New York, after touching 81.28, the highest since Aug. 8. It rose 0.5 percent to $1.0484. New Zealand’s currency advanced to 64.26 yen from 64.07 and gained 0.5 percent to 83.12 U.S. cents. The Aussie has risen 0.8 percent against the greenback over the past week, while the kiwi has jumped 1.6 percent, set to break a three-week losing streak. Swaps traders have pared their bets on Australian interest- rate cuts, with a Credit Suisse Group AG index signaling 127 basis points of reductions over the next 12 months, less than the 153 basis points indicated last week. Tightening in Sights “Inflation bears careful watching, but we can keep it under control,” said Stevens today in his opening statement to a parliamentary committee in Melbourne. “If the global backdrop stabilizes, it appears fairly clear to us the RBA has policy tightening in its sights,” Gavin Stacey, an interest-rate strategist in Sydney at Barclays Capital, and Joaquin Vespignani, an economist at the company, wrote in a note today. The New Zealand dollar appreciated against all but one of its 16 major peers on prospects demand for the country’s dairy products will increase. “As a meat and dairy exporter, New Zealand is well positioned to benefit from China’s structural rise in wealth,” Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore, wrote in an e-mailed note today. “The big picture remains positive for New Zealand, suggesting that the New Zealand dollar could be a commodity currency that is well- supported for much longer.” China was the South Pacific nation’s second-biggest export market after Australia in July, according to a trade report from Statistics New Zealand on Aug. 24. Stevens said today that China’s growth appears to be still “pretty solid.” The New Zealand dollar, nicknamed the kiwi, has gained 6.5 percent over the past six months, the second-best performer after the Swiss franc among counterparts tracked by Bloomberg Correlation-Weighted Currency Indexes. To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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