AUSTRILIAN, N.S DOLLAR FALL ON FEED PURCHASE REPORT.

JANE BRYANT QUINNJOHN DORFMANPORTFOLIO TRACKERCALCULATORSFINANCIAL GLOSSARY
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Australian, N.Z. Dollars Fall on Fed Bond Purchases Report
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By Candice Zachariahs

June 12 (Bloomberg) -- The Australian and New Zealand dollars fell against the U.S. currency, paring this week's gains, on speculation the Federal Reserve will let yields climb rather than boosting purchases of U.S. bonds.

The currencies weakened as the Wall Street Journal reported the Fed will probably maintain its current level of purchases of Treasuries and mortgage-backed securities when it meets in late June, without saying where it got the information. The Australian and New Zealand dollars headed for a fourth weekly advance against the yen as traders raised bets the countries' central banks will boost rates within a year.

"We may be approaching a tipping point in U.S. yields and energy prices and once we get there prospects for the global economic recovery may start to be harmed," said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. "Parts of the global economy are facing increasing headwinds and the arguments for a correction in risky currencies are rising."

NOTE: the autrilian and new zealand dollars headed for afourth weekly advace aganst the yen as traders raise bets the countrys'

Australia's currency fell 0.9 percent to 81.17 U.S. cents as of 5:37 p.m. in Sydney and has gained 2.3 percent this week. The currency touched 80.27 yen today, near the most since Oct. 6, before trading at 79.49 yen.

New Zealand's dollar slipped 0.4 percent to 64.04 U.S. cents today and also advanced 2.3 percent since trading at 62.64 cents in New York on June 5. The currency added 1.5 percent this week against the yen to 62.73 yen.

The Australian dollar may trade at 77 U.S. cents by month- end, while New Zealand's currency may fall toward 60 cents, Rennie said.

Rapid Gains

"The Aussie's had a fairly positive week and everyone is looking for a pull-back," said Charles Wiggins, corporate risk manager at Custom House Global Foreign Exchange in Sydney. "If the Aussie continues to fall, you'd be looking back down towards the 80.80 and then 80.30-cent region."

New Zealand's retail sales rose for the second time in three months in April. Sales gained 0.5 percent from March, seasonally adjusted, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of nine economists was for a 0.2 percent gain.

Interest Rates

Bets on interest-rate increases rose yesterday after Australia lost fewer jobs than expected and Reserve Bank of New Zealand Governor Alan Bollard said his country's economy would start to recover toward the end of the year.

The Reserve Bank of Australia will add 70 basis points to its benchmark over the next 12 months, while Bollard will boost borrowing costs by 66 points, according to separate Credit Suisse indexes. A basis point is 0.01 percentage point.

"This notion that the worst of the global recession is behind us is adding to risk appetite and lending support to risk proxies like the Aussie and kiwi particularly against low- yielding currencies," said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. "There's increasing evidence these central banks are close to or at the end of their easing cycles."

Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S.

Australia today sold A$699 million ($571.3 million) of debt maturing June 2011 at a weighted average yield of 4.01 percent. The so-called bid-to-cover ratio at the auction was 3.4.

Australian government bonds advanced. The yield on 10-year notes fell 10 basis points, or 0.10 percentage point, to 5.54 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.735, or A$7.35 per A$1,000 face amount, to 97.83.

New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 3.86 percent after climbing to 3.98 percent yesterday, the most since March 30.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Last Updated: June 12, 2009 03:52 EDT

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