Australian, N.Z. Dollars Gain on Expectation Equities to Rise

April 6 (Bloomberg) -- The Australian and New Zealand dollars advanced as futures markets signaled regional equities will rise after U.S. stocks posted the longest stretch of weekly gains since 2007.

New Zealand’s currency rose to the highest since January after March U.S. job losses were close to the median forecast, indicating the worst of the global recession may be over. Gains in the South Pacific currencies may be limited before tomorrow’s meeting of the Reserve Bank of Australia where 14 economists expect no change in the benchmark rate, four are calling for a 25 basis point cut and five forecast a 50 basis point reduction, according to a Bloomberg News survey.

“Markets are reading the payrolls data to say possibly the worst is behind us so the risk-appetite support for the Aussie is still there,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “If the RBA stays on hold the Aussie may easily reach October highs, if they cut 25 or 50 basis points it will struggle to maintain momentum.”

Australia’s currency rose 0.2 percent to 71.67 U.S. cents as of 8:22 a.m. in Sydney from 71.51 cents late in New York yesterday. The currency advanced 0.4 percent to 72.01 yen.

New Zealand’s dollar gained 1.3 percent to 59.30 U.S. cents, the strongest since Jan. 9, from 58.57 in New York. It bought 59.33 yen from 58.76.

The Australian dollar may reach as high as 73.15 U.S. cents this week if the central bank stays on hold, or it may decline to 68.50 cents if policy makers lower borrowing costs.

Benchmark interest rates are 3.25 percent in Australia and 3 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 may erase profits.

Interest Rates

Traders are betting the RBA will lower the benchmark borrowing rate by 25 basis points to 3 percent, according to a Credit Suisse Group index based on swaps trading. The Reserve Bank of New Zealand will lower rates 50 basis points when it meets April 30, a separate poll of economists shows.

Australia’s home-loan approvals probably rose 2 percent in February, according to a survey of economists before the statistics bureau reports the data on April 8. The unemployment rate in March likely advanced to a five-year high of 5.4 percent, according to a separate survey. That report is due on April 9.

Futures traders increased their bets the Australian dollar will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 11,287 on March 31, compared with net longs of 8,413 a week earlier.