June 19 (Bloomberg) -- The Australian and New Zealand dollars advanced against the yen, paring their first weekly declines since May, as gains in Asian stocks and U.S. equity futures spurred demand for higher-yielding assets.
The two currencies rose for third day versus the dollar as interest rates of 3 percent in Australia and 2.5 percent in New Zealand attracted investors to the South Pacific nations’ assets. The Australian and New Zealand currencies have moved in line with the Standard & Poor’s 500 Index about 80 percent of the time this year and tracked the Nikkei 225 Stock Average more than 90 percent of the time.
“We’ve seen improving risk appetite as sentiment towards the global economy improves,” said Danica Hampton, a currency strategist in Wellington at Bank of New Zealand Ltd. “That’s provided support to growth-sensitive currencies like the Aussie and kiwi.”
Australia’s currency strengthened 0.4 percent to 77.33 yen as of 11:36 a.m. in Sydney from yesterday in New York. It has still lost 3.3 percent this week. The so-called Aussie gained 0.3 percent to 80.06 U.S. cents, paring its loss this week to 1.4 percent.
New Zealand’s dollar advanced 0.3 percent to 61.70 yen and gained 0.2 percent to 63.87 U.S. cents. It is still down 2.5 percent versus the yen and 0.7 percent against the greenback over the past five days.
The Australian dollar may advance towards 80.75 U.S. cents and New Zealand’s currency may gain to 64.50 cents, Hampton said.
Stocks Gain
Asian stocks rose today after U.S. reports on jobless claims and manufacturing yesterday added to evidence the recession in the world’s largest economy may be bottoming.
The Labor Department said continuing jobless claims fell by 148,000 to 6.69 million, the first drop since January. The Conference Board’s index of leading economic indicators climbed 1.2 percent and a Federal Reserve report showed Philadelphia- area manufacturing shrank at the slowest pace in nine months.
The Australian and New Zealand dollars slid this week after the South Pacific nations’ central banks signaled room for interest-rate cuts.
Investors buying the New Zealand currency expecting a strong recovery may be disappointed, central bank Governor Alan Bollard said June 17.
“We expect the economy to begin growing again toward the end of the year, but the recovery is likely to be slow and drawn-out,” Bollard said in a speech in Wellington. “It could also be erratic.”
The Reserve Bank of Australia said yesterday it sold A$1.4 billion ($1.12 billion) of its own currency in May, the biggest net sales by the bank since February 2004, as the Aussie rose by a record that month.
‘Still Fragile’
Policy makers in Australia and New Zealand “are trying to highlight that the recoveries, or the green shoots, we’re seeing are still fragile and if currencies and interest rates trend higher they are at risk of being destabilized,” Hampton said. “There has been some fear that we will see risk aversion resurface.”
Australia today sold A$700 million of bonds maturing April 2012 at a weighted average yield of 4.53 percent. The so-called bid-to-cover ratio at the auction was 1.9.
Australian government bonds declined for a third day. The yield on the benchmark 10-year note gained 14 basis points, or 0.14 percentage point, to 5.75 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 1.031, or A$10.31 per A$1,000 face amount, to 96.332.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.89 percent from 3.88 yesterday.
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