By Candice Zachariahs July 23 (Bloomberg) -- The New Zealand dollar rose toward a nine-month high after Asian stocks advanced for an eighth day, the longest winning streak since January, boosting demand for higher-yielding assets. The Australian dollar gained to near the strongest in more than a month after the premium investors get for investing in two-year government bonds over U.S. Treasuries of similar maturity climbed yesterday to the largest since October. New Zealand’s currency advanced yesterday to its strongest this year as the Standard & Poor’s 500 Index touched the highest since November on corporate earnings. “The earnings reporting season in the U.S. has been largely positive and that’s seen equities strengthen and risk appetite increase,” said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. “In the near term, New Zealand’s dollar could go higher after breaking past key resistance levels and on improvements in risk appetite.” New Zealand’s dollar rose 0.2 percent to 65.99 U.S. cents as of 4:50 p.m. in Sydney, from 65.85 cents in New York yesterday when it climbed to 66.30 cents, the most since Oct. 3. It bought 62.24 yen from 61.68 yen. Australia’s currency gained 0.4 percent to 81.89 U.S. cents from 81.57 cents in New York yesterday, when it reached 82.12 cents, the strongest since June 12. The currency advanced 1.1 percent to 77.25 yen. Equities Advancing The MSCI Asia Pacific Index added 0.3 percent to 106.95, led by automakers and technology companies, and has gained 9 percent in the past eight days. The S&P 500 Index closed little changed yesterday after reaching 956.83, the highest level since Nov. 5. The Nasdaq Composite Index rose for an 11th straight day, its longest rally since 1996, as Starbucks Corp. surged the most since going public and Apple Inc. jumped on better-than-expected earnings. The Australian dollar also gained after a government report showed Japan’s exports fell in June at the slowest pace this year as demand picked up worldwide. Japan and China are Australia’s largest export markets. Benchmark interest rates are 3 percent in Australia and 2.5 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 will erase profits. Carry Trades Demand for the currencies has risen as traders added to bets benchmark borrowing costs will go up. Australia will increase interest rates 88 basis point in a year and New Zealand will add 84 basis point to its target rate, according to Credit Suisse indexes based on swaps trading. “With policy rates in Australia the highest of the majors and the prospect of the RBA leading the tightening pack, higher rates are likely to precipitate interest in carry trades,” Fiona Lake, a Hong Kong-based economist at Goldman Sachs, wrote in a note yesterday. “We expect the RBA to hike rates by 150 basis points next year.” The Australian dollar will trade at 82 cents over the next six months, with the potential for it to strengthen beyond Goldman Sachs’ forecasts, she wrote. “Risk is back in the markets, people are willing to take bigger bets and we are seeing perhaps a resumption of the carry trade,” said Arjuna Mahendran, the Singapore-based chief investment strategist for Asia at HSBC Private Bank, in a Bloomberg Television interview. Australian government bonds slipped. The yield on 10-year notes added four basis points, or 0.04 percentage point, to 5.58 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.284, or A$2.84 per A$1,000 face amount, to 97.588. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.90 percent from 3.93 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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