The Australian dollar advanced for a second day as Asian stocks rose on speculation corporate profits will recover as the global economy stabilizes. The New Zealand currency was little changed. Australia’s currency climbed toward a seven-month high against the greenback after a former U.S. comptroller general wrote in the Financial Times that the U.S.’s AAA credit rating may be at risk. New Zealand’s dollar erased earlier gains after central bank Deputy Governor Grant Spencer said the currency “will revert to a downward trend.” “The high yielders are still looking attractive but a bit overcooked and at some point due for a correction,” said Euan McCreadie, a senior corporate dealer at online foreign-exchange firm OzForex Ltd. in Sydney. Australia’s currency rose 0.4 percent to 76.74 U.S. cents as of 2:53 p.m. in Sydney from 76.50 cents in New York yesterday. The currency climbed 0.3 percent to 74.02 yen. New Zealand’s dollar bought 60.62 U.S. cents from 60.60 cents yesterday, after earlier rising to as high as 61.05 cents. The kiwi slid 0.1 percent to 58.36 yen. Australia’s dollar will trade between 76 and 77 U.S. cents and New Zealand’s between 60 and 61 cents today, McCreadie said. ‘Biggest’ Risk The South Pacific nations’ currencies earlier advanced as the dollar traded near its weakest since March against the euro as David Walker wrote in the FT that the U.S. government should create a “fiscal future commission” to rein in the country’s finances because its credit rating may be cut. “There’s a developing backlash against the dollar,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “There’s a risk that we see the risk appetite that’s been coming back over the past couple of months level off.” The New Zealand dollar may peak at 61.30 U.S. cents and the Australian currency is likely to struggle to rise beyond 77.30 U.S. cents, according to Gibbs. New Zealand’s currency slipped this morning after RBNZ Deputy Governor Spencer said there was scope for monetary policy movement, raising concern interest rates will fall further. Spencer said he was “disappointed” with banks’ response to an April rate cut as the nation struggles to emerge from its worst recession in more than three decades. “If necessary, the central bank is saying they can ease a lot more and they want the market to start building in those expectations,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “Particularly the last few cuts have been less noticeably passed on in mortgage rates.” Rates, Bonds Key interest rates at 2.5 percent in New Zealand and 3 percent in Australia, compared with benchmarks close to zero in the U.S. and Japan, attracting investors to the South Pacific nations’ assets. Australia today sold A$701 million ($539.86 million) of securities due April 2012 at a weighted average yield of 3.86 percent. Investors bid for 4.4 times the bonds offered. Developments in emerging Asia “will be crucial” for the Australian dollar, analysts led by Hans-Guenter Redeker, the London-based global head of currency strategy for BNP Paribas SA, wrote in a note to clients yesterday. “With Asian investors sitting on liquidity, we expect them to consider Australian- dollar assets as a viable option.” BNP recommends investors buy the currency at 76.60 U.S. cents as it may advance toward 82 cents in the short term. They should sell the Aussie if it falls to 75.60 cents, the bank said. Australian government bonds advanced with the yield on 10- year notes falling three basis points, or 0.03 percentage point, to 4.90 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.21, or A$2.10 per A$1,000 face amount, to 102.67. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.46 percent from 3.53 yesterday.

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