The Australian dollar touched its highest since August 2008 as retail sales gained for the first time in three months, adding to speculation the central bank will raise interest rates as early as November. New Zealand’s dollar rose toward its longest monthly winning streak since 2004 as business confidence climbed this month after the economy emerged from recession. The so-called Aussie headed for its longest stretch of monthly gains in at least 26 years as futures markets show a more than 80 percent chance that Reserve Bank Governor Glenn Stevens will lift the benchmark rate from a half-century low in November. “The market’s focus was on the retail sales number which had a very strong result,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “The market is almost fully priced in for a November move from the RBA and that’s certainly an Aussie positive.” Australia’s currency rose to 88.04 U.S. cents as of 12:55 p.m. in Sydney from 87.03 cents in New York yesterday. The currency has climbed 4.3 percent since Aug. 31, heading for an eighth month of gains, its longest stretch since at least 1983 when the Aussie was freely floated. The currency advanced 0.6 percent to 78.90 yen and has gained every quarter this year against Japan’s currency. New Zealand’s dollar rose 1 percent to 72.13 U.S. cents, heading for a seventh monthly advance. It bought 64.67 yen from 64.34 yen. A net 32.2 percent of companies surveyed in New Zealand this month expect sales and profits will increase over the next 12 months, up from 26 percent in August, according to a report released by ANZ National Bank Ltd. in Wellington today. The nation’s third-quarter employment confidence index rose to 103 from 96.1 in the previous quarter, a report from Westpac Banking Corp. and McDermott Miller Ltd. showed. A reading above 100 indicates most people are optimistic about employment prospects. Rate Bets The Australian currency rose for a third day against the yen as the Bureau of Statistics said retail sales climbed 0.9 percent from July, when they dropped a revised 0.9 percent. The median forecast of 12 economists surveyed by Bloomberg News was for a 0.5 percent gain. That added to speculation Stevens may signal he is closer to increasing the benchmark rate when policymakers meet Oct. 6. One of 17 economists surveyed by Bloomberg News forecasts a rate increase at that meeting. 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., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. ‘Aggressive’ Tightening Cycle New Zealand’s currency will climb toward 74.50 U.S. cents by the middle of 2010 and trade at A$0.83 this year, Chris Green, an Auckland-based research analyst at First NZ Capital Ltd., forecast in a note to clients today. “The risk distribution around these forecasts is skewed toward a stronger New Zealand dollar,” Green wrote, citing a weak U.S. currency, rising risk appetite, stronger prices for commodities the nation exports and better economic data. The so- called kiwi may also be bolstered by “an earlier and more aggressive domestic tightening cycle,” he wrote. The Reserve Bank of New Zealand will raise its benchmark rate by 1.53 percentage points over 12 months, according to a Credit Suisse index based on swaps trading, compared with bets on 1.16 points of increases at the beginning of September. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.31 percent from 4.25 percent yesterday. Australian government bonds fell for a second day. The yield on 10-year notes added seven basis points, or 0.07 percentage point, to 5.29 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.546, or A$5.46 per A$1,000 face amount, to 99.680. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

Source