By Candice Zachariahs Oct. 30 (Bloomberg) -- Australia and New Zealand’s dollars were little changed, set for their longest stretch of monthly gains since the 1980s, as the U.S. economy’s return to growth boosted demand for higher-yielding assets. The so-called Aussie and kiwi -- which were floated freely in 1983 and 1985 respectively -- gained yesterday as prices of commodities climbed more than 2 percent and the MSCI AC World Index of stocks ended seven days of losses. Both currencies yesterday touched their lowest levels in three weeks as traders cut bets on interest-rate increases over the next 12 months. “Not only has the U.S. officially got itself out of recession but the 3.5 percent print on the quarterly number made the Aussie look like a perfect dip-buying opportunity,” said Tony Bieber, a trader at Suncorp-Metway Ltd. in Brisbane. “The market is refocusing on the optimism out there.” Australia’s currency bought 91.65 U.S. cents as of 4:25 p.m. in Sydney from 91.50 cents in New York yesterday and is set to gain 3.8 percent in October, its ninth straight monthly gain. The currency was at 83.53 yen, a 5.5 percent advance this month. New Zealand’s dollar slipped to 73.25 U.S. cents from 73.29 in New York and has added 1.3 percent since Sept. 30, its eight straight month of advances. It fetched 66.76 yen, up 2.9 percent for the month. The U.S. economy returned to growth in the third quarter after a year-long contraction, expanding 3.5 percent as government incentives spurred consumers to spend more on homes and cars. The median estimate of 79 economists in a Bloomberg survey was for 3.2 percent growth. “The Aussie will probably be capped around the 92-cent level this session with the Reserve Bank of Australia and the Federal Open Market Committee meetings next week,” Bieber said. The New Zealand currency may gain to 73.70 cents, he said. Central Banks Demand for both South Pacific currencies may be tempered before policy makers in Australia and the U.S. meet Nov. 3 and Nov. 5, respectively. Futures markets are betting that the Reserve Bank of Australia will raise interest rates 25 basis points to 3.5 percent, a decision expected by 16 of 20 economists in a Bloomberg survey. Four forecast a 50 basis point increase. Australia’s dollar may be supported by expectations that the Reserve Bank of Australia’s Quarterly Monetary Policy Statement on Nov. 6 will “reveal sharp upward revisions to projected consumer price inflation and gross domestic product forecast,” Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney, wrote in a note to clients today. The bank expects the RBA to increase rates to 5 percent by end-2010. The New Zealand central bank yesterday signaled interest rates will stay at a record low until the second half of 2010, damping demand for the nation’s assets. Pressured Kiwi “There’s pressure on the kiwi against the Australian dollar,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. “The RBNZ stayed firmly on the easing side of neutral.” The kiwi will find support at 72.71 cents and NZ$1.2545, he said. It traded at NZ$1.2515 versus the Australian dollar. New Zealand’s home-building approvals rose for the fifth time in six months in September with permits increasing 3.3 percent from August, Statistics New Zealand said, citing seasonally adjusted figures. Benchmark interest rates are 3.25 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. Australian government bonds were little changed with the yield on 10-year notes at 5.55 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.021, or A$0.21 per A$1,000 face amount, to 97.861. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.53 percent from 4.55 yesterday.

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