The Australian dollar traded near a two-year high against the U.S. currency as gains in stocks and ‘commodities boosted demand for growth-sensitive currencies. New Zealand’s dollar was close to the strongest in almost 11 months on speculation the Federal Reserve will increase purchases of government debt to spur growth. The so-called Aussie traded near a two-week low against the New Zealand dollar after Reserve Bank Governor Glenn Stevens unexpectedly kept Australia’s benchmark interest rate at 4.5 percent yesterday. “The Fed is still likely to pump billions of billions of dollars into the system,” said Jonathan Cavenagh, currency strategist at Westpac Banking Corp. in Sydney. “All that liquidity has to find a place. Some of that will stay in the U.S. and some of that will inevitably try to find a better yield somewhere. Part of that will be the Aussie dollar.” Australia’s currency traded at 97.10 U.S. cents as of 4:01 p.m. in Sydney from 97.17 cents in New York yesterday. It touched 97.51 U.S. cents on Oct. 1, the highest level since July 2008. The Aussie was at 80.74 yen from 80.87 yen. It was at NZ$1.2977 from NZ$1.2970, after touching NZ$1.2895 yesterday, the lowest since Sept. 20. New Zealand’s dollar, nicknamed the kiwi, fetched 74.83 U.S. cents from 74.93 cents. It reached 74.99 cents yesterday, the strongest level since November 2009. The currency was at 62.22 yen from 62.36 yen. The MSCI Asia Pacific Index of regional shares rose 1.3 percent. The Dow Jones Industrial Average gained 1.8 percent and the Reuters/Jefferies CRB Index of raw materials advanced 1.6 percent yesterday. ‘Risk On’ “Risk on pretty much covers it,” Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington, wrote in a note today. “Commodities soar, dragging commodity currencies higher.” Benchmark interest rates of 4.5 percent in Australia and 3 percent in New Zealand compare with as low as zero in the U.S. and Japan, making the South Pacific nations’ assets attractive to investors seeking higher returns. The risk in such trades is that currency market moves will erase profits. Fed Chairman Ben S. Bernanke said this week that the central bank’s first round of large-scale asset purchases that ended in March improved the economy and that further buying is likely to help more. New York Fed President William Dudley said on Oct. 1 that the central bank has the “tools that can provide additional stimulus at costs that do not appear to be prohibitive.” The Reserve Bank of Australia yesterday left its benchmark interest rate unchanged yesterday for a fifth-straight month, contrary to predictions of most economists polled by Bloomberg News who expected a quarter-point increase. More Caution Australia’s consumers and companies are showing more caution than before the global financial crisis, even as a mining boom stokes the economy, a central bank official said. “Our reading of recent data is that the Australian household and business sectors have, in aggregate, entered a phase of expansion,” Luci Ellis, head of financial stability at the central bank, said in prepared remarks in Brisbane today. “But they seem to be showing more financial caution than they did prior to the crisis.” The yield on Australia’s 10-year note was little changed at 5 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.73 percent from 3.72 percent. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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