The Australian and New Zealand dollars rose to the highest in a month as stocks worldwide rallied, prompting speculation investors will buy more higher- yielding assets. The currencies headed for a second weekly gain as prices of commodities, which account for more than half of the South Pacific nations’ exports, climbed the most since March 4. New Zealand’s dollar strengthened to a two-month high versus the yen after the central bank yesterday said it may slow the pace of interest-rate cuts after this week reducing its benchmark to a record low. “The acute pessimism that had been priced into the markets is being retracted a little, with commodities drifting up and bank stocks rising,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The Australian dollar may rise toward 66.20 cents and New Zealand’s to 53.40 cents in the next few days, he said. Australia’s currency rose to 65.38 U.S. cents as of 2:52 p.m. in Sydney from 64.58 cents in Asia yesterday and 64.05 cents in New York last week. It touched 65.79 cents, the highest since Feb. 13. The currency advanced to 63.82 yen from 62.19 late yesterday. New Zealand’s dollar gained to 51.99 U.S. cents from 51.22 in Asia yesterday and 50.25 cents in New York on March 6. It reached 52.36 cents, also the strongest since Feb. 13. The currency climbed to 50.79 yen from 49.32 yen. It touched 51.11 yen, the most since Jan. 13. Stocks Rally U.S. stocks yesterday completed the biggest three-day gain since November and have surged since the Standard & Poor’s 500 Index fell to a 12-year low on March 9. Equities advanced after Bank of America Corp., the biggest U.S. bank, joined competitors JPMorgan Chase & Co. and Citigroup Inc. in saying this week that it made money during the first two months of 2009. Australia S&P/ASX 200 Index jumped 3.3 percent, the biggest increase since Dec. 8. The currencies also rose as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials strengthened. Commodities account for 60 percent of Australia’s exports and 70 percent of New Zealand’s. New Zealand’s dollar gained a third day against Australia’s currency, rising to NZ$1.2522, the highest level in three weeks. Reserve Bank of New Zealand Governor Alan Bollard yesterday cut borrowing costs by 0.5 percent to 3 percent and said further reductions will be “much smaller than observed recently.” ‘Back in Kiwi’ “People are happy to be back in kiwi, especially since it looks like we’re going to maintain our rate differential” over other industrialized economies, ANZ’s Allen said, referring to the currency by its nickname. Higher interest rates in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S. attract investors to the South Pacific nations’ higher-yielding assets. Australia’s benchmark is 3.25 percent. Australia today sold A$600 million ($392 million) of securities maturing August 2010 at a weighted average yield of 2.59 percent. The so-called bid-to-cover ratio at the auction was 2.6. Australian government bonds fell. The yield on 10-year notes rose five basis points, or 0.05 percentage point, to 4.32 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.387, or A$3.87 per A$1,000 face amount, to 107.499. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.43 percent from 3.36 yesterday. The spread between that rate and Australia’s two-year swap rate was 31.5 basis points.

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