The Australian dollar climbed to a record after a government report showed producer prices rose more than economists estimated in the first quarter, providing additional evidence that growth is quickening. The so-called Aussie strengthened for a third day and New Zealand’s advanced for a second versus the U.S. currency as stock gains boosted demand for the nations’ higher-yielding assets. New Zealand’s dollar reached a three-year high versus the greenback as traders added to bets the central bank will raise interest rates over the next 12 months. “The macro-economic backdrop is great and getting better,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. “There are plenty of reasons to love the Aussie at the moment, not the least of which is our favorable yield advantage.” Australia’s dollar climbed to $1.0766 as of 4:16 p.m. in Sydney from $1.0714 in New York yesterday, after reaching $1.0772, the strongest since it was freely floated in 1983. The Aussie was at 88.33 yen from 88.45 yen. New Zealand’s dollar rose 0.7 percent to 80.34 U.S. cents after appreciating to 80.38 cents, the highest level since March 2008. The currency was at 65.91 yen from 65.87 yen. The MSCI Asia Pacific Index of shares rose 1.3 percent after the Standard & Poor’s 500 Index climbed 1.4 percent in New York yesterday. Producer Prices Producer prices in Australia rose 1.2 percent in the first quarter from the prior three months when they climbed 0.1 percent, the Bureau of Statistics said in Sydney. Economists surveyed by Bloomberg News forecast a 1 percent increase. “Today’s data reinforce our view that the same pipeline price pressures exist as did pre-financial crisis,” Roland Randall, senior strategist of fixed income and foreign exchange in Singapore at TD Securities Inc., wrote in a note to clients. “Australia’s dollar has outperformed both its dollar-bloc peers,” he said, referring to the New Zealand and Canadian currencies. Australia’s dollar has risen 3.8 percent over the past six months in a measure of the foreign exchange of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes. New Zealand’s dollar has appreciated 1.2 percent and Canada’s has strengthened 1.9 percent. ‘Pay a Price’ Australia won’t “manipulate” its currency and countries that do so will “pay a price,” Foreign Minister Kevin Rudd said yesterday in a Bloomberg Television interview. Rudd ruled out intervention in the so-called Aussie, which has gained 16 percent in the past year against the dollar. The currency’s gains have been spurred by revenue from shipments of coal and iron ore to China, and they have hurt Australian tourism, manufacturing and education. Benchmark interest rates are 4.75 percent in Australia and 2.5 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The Reserve Bank of New Zealand will raise its benchmark rate by 63 basis points in the next 12 months, a Credit Suisse Group AG index based on swaps showed today. That compares with a prediction of 49 basis points yesterday. Australian bonds fell for a second day. The two-year yield rose one basis point to 4.97 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped three basis points to 3.36 percent. To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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