The Australian dollar headed for its third week of gains versus the U.S. dollar and the yen as investors pared bets the Reserve Bank will cut interest rates. The Aussie was 0.5 percent from a one-month high against the greenback as traders signaled an 84 percent chance that RBA Governor Glenn Stevens will hold the developed world’s highest benchmark unchanged on Sept. 6. New Zealand’s currency rose for a second week against the U.S. dollar as Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, maintained its forecast payout to farmers. “Markets are just pricing out, to a reasonable degree, an imminent risk of a rate cut, at least for the month of September,” by the RBA, said Darryl Conroy, a financial markets analyst at Suncorp Bank in Brisbane. “That might be one of the drivers behind the Aussie’s solid performance.” Australia’s dollar traded at $1.0704 at 2:36 p.m. in Sydney from $1.0722 yesterday, when it touched $1.0765, the most since Aug. 4. The currency fetched 82.28 yen from 82.48. New Zealand’s dollar bought 85.04 U.S. cents from 85.08 cents yesterday, and traded at 65.37 yen from 65.46. Cash-rate futures show traders reduced to 16 percent the chance that the RBA will cut rates this month, from 32 percent on Aug. 26. The Aussie has risen 1.2 percent against the dollar and 1.5 percent against the yen this week while the kiwi has climbed 1.2 percent and 1.4 percent respectively. Rate Expectations Investors should buy the Aussie against New Zealand’s dollar if it falls to NZ$1.2450 because cash-rate expectations are “more under-priced” for the RBA, Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, wrote in a note to clients. Credit Suisse Group AG indexes based on swaps trading show the RBA will cut its key rate of 4.75 percent by 114 basis points over a year, while the Reserve Bank of New Zealand will increase its 2.5 percent benchmark by 46 basis points. Swaps indicate the Aussie-kiwi exchange rate “has overshot to the downside since relative cash rate expectations remain a strong driver,” Trinh wrote. The Aussie will rise to NZ$1.32 in the coming year, the strategist predicts. Investors should exit the trade if the Australian dollar falls to NZ$1.22, she wrote. It traded at NZ$1.2584 today. Payouts Maintained The kiwi halted yesterday’s decline against the dollar as Fonterra said it expects to pay its 10,500 farmer shareholders NZ$6.75 ($5.75) per kilogram of milk solids in the year ending May 31, 2012. That matches its forecast in May this year, the company’s highest opening estimate. Fonterra processes 95 percent of New Zealand’s milk and generates more than 20 percent of the nation’s annual export earnings, according to its website. Gains in the Australian and New Zealand dollars were limited before a U.S. report that economists said will probably show hiring slowed in August. Payrolls climbed by 68,000 workers after a 117,000 increase in July, according to the median forecast of economists surveyed by Bloomberg News before Labor Department data today. “If it’s a good non-farm payrolls number, the U.S. dollar may rise,” said Richard Grace, the Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia. On a poor number “you’ve got a greater risk of the Fed introducing an additional easing measure, putting downward pressure on U.S. yields and the U.S. dollar.” To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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