The Australian and New Zealand dollars traded near the highest in three months as regional equities extended the longest stretch of weekly gains in U.S. stocks since 2007. New Zealand’s currency touched the strongest since November versus the yen as a report showed its consumers are less pessimistic amid falling interest rates. Gains in the South Pacific currencies may be limited before tomorrow’s meeting of the Reserve Bank of Australia where 14 of 23 economists in a Bloomberg News survey expect no change in the benchmark rate. The markets may gauge that “possibly the worst is behind us so the risk-appetite support for the Aussie is still there,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “If the RBA stays on hold the Aussie may easily reach October highs, if they cut 25 or 50 basis points it will struggle to maintain momentum.” Australia’s currency rose 0.4 percent to 71.82 U.S. cents as of 3:29 p.m. in Sydney, near the highest since Jan. 7, from 71.51 cents late in New York on April 3. The currency advanced as much as 1.4 percent to 72.75 yen, the most since Oct. 14, before buying 72.39 yen. New Zealand’s dollar gained to 59.80 U.S. cents, the strongest since Jan. 7, before buying 59.38 U.S. cents from 58.57 in New York. It bought as much as 60.35 yen, the most since Nov. 5, and traded at 59.85. The Australian dollar may strengthen to as much as 73.15 U.S. cents this week if the central bank stays on hold, or it may decline towards 68.50 cents if policy makers lower borrowing costs, Auster said. Interest Rates Benchmark interest rates are 3.25 percent in Australia and 3 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’ higher-yielding assets. The risk in such trades is that currency-market moves may erase profits. Traders are betting the RBA will lower its benchmark borrowing rate by at least 25 basis points with a 32 percent chance of a bigger cut, according to a Credit Suisse Group index based on swaps trading. The Reserve Bank of New Zealand will lower rates 50 basis points when it meets April 30, a separate poll of economists shows. RBNZ Governor Alan Bollard said April 1 that long-term rates had risen too high and were “unwarranted and inconsistent” with the policy outlook. New Zealand’s dollar is the best performer against the greenback and yen among the 16 most-traded currencies over the past month, gaining 18 and 21 percent, respectively. Australia’s currency has advanced 12 and 15 percent. Asia Ties The South Pacific currencies will gain “because of their relationship with Asia. Our expectation is that Asia will probably be the first to rebound,” Sharada Selvanathan, a Hong Kong-based currency strategist at BNP Paribas SA, France’s largest bank, said in Bloomberg TV interview. “The kiwi is more a short-term play because if financial risk aversion comes back into the market, the kiwi will be hit,” she said referring to the currency by its nickname. Australia’s dollar may rise as high as 74.20 U.S. cents and the kiwi may reach 63.25 cents, BNP said in a report April 3. Thirty-nine percent of 1,000 people polled last week said the economy will deteriorate in the next 12 months, according to a Colmar Brunton poll for Television New Zealand. The gauge reached 46 percent at the last poll in February, the highest since August. Job Ads Australian advertisements for job vacancies tumbled in March for an 11th month with jobs advertised in newspapers and on the Internet dropping 8.5 percent from February and a record 44.6 percent from a year earlier, according to an Australia & New Zealand Banking Group Ltd. report released today. Futures traders increased their bets the Australian dollar will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 11,287 on March 31, compared with net longs of 8,413 a week earlier. Australian government bonds slid for a second day. The yield on 10-year notes climbed 17 basis points, or 0.17 percentage point, the most since Jan. 5, to 4.60 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 1.37, or A$13.70 per A$1,000 face amount, to 105.17. “The positive sentiment from equity markets fed through and we’ve seen quite a sharp sell-off particularly at the long- end,” of the yield curve, said Jarrod Kerr, a senior interest- rate strategist at Commonwealth Bank of Australia. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.92 percent from 3.91 percent on April 3.

Source