By Candice Zachariahs Nov. 2 (Bloomberg) -- The Australian and New Zealand dollars rose as government officials said the South Pacific nations’ economic expansions will quicken, boosting demand for their assets. Both currencies erased earlier declines as futures signaled U.S. stocks may recover from their biggest weekly slump since May. The Australian economy will grow 1.5 percent in the 12 months ended June 30, 2010, and the jobless rate will peak at 6.75 percent, below previous forecasts, Treasurer Wayne Swan said. The central bank is forecast to raise its benchmark rate to 3.5 percent tomorrow. “The news regarding unemployment in Australia has pushed the Aussie dollar to reclaim that 90-cent level,” said Tim Waterer, a foreign-exchange dealer at CMC Markets in Sydney. “Trading leading into the RBA number will be determined by how U.S. equities and the U.S. dollar fare tonight.” Australia’s currency rose 0.5 percent to 90.41 U.S. cents as of 4:26 p.m. in Sydney from 89.97 cents in New York on Oct. 30. It earlier fell as low as 89.07 cents, the least since Oct. 8. The currency gained 0.3 percent to 81.30 yen. It touched 79.47 yen, also the weakest since Oct. 8. New Zealand’s dollar added 0.2 percent to 71.97 U.S. cents, after earlier trading as low as 70.83, the weakest since Oct. 2, from 71.81 in New York last week. It touched 63.21 yen, a one- month low, before buying 64.76 yen. “The improved economic outlook reflects the effectiveness of monetary and fiscal stimulus in Australia, and the stronger global recovery,” Swan said today. The government had in May predicted a 0.5 percent contraction and 8.25 percent jobless rate by the second quarter of 2010. Economic Growth Australia’s currency rose from its lowest in more than three weeks as a gauge of house prices rose 4.2 percent in third quarter, beating analysts’ expectations for a 3 percent gain. Both currencies were also higher as Standard & Poor’s 500 futures signaled the S&P 500 index may retrace some of last week’s 4 percent drop. “The market is very skittish from the liquidation we had last week and this morning,” said Phil Burke, chief foreign- exchange dealer at JPMorgan Chase & Co. in Sydney. “Equity futures have turned positive so we could see the Aussie climb up to 90.50 U.S. cents.” New Zealand’s economic rebound is accelerating as global demand recovers faster than expected, the nation’s Treasury Department said. New Zealand’s economy expanded 0.1 percent in the three months to June, the first growth in six quarters. N.Z. Recovery “The Treasury is expecting the economy to grow at an annual rate of around 2 percent over the second half of 2009,” it said in a report posted on its Web site today. The report contained no detailed forecasts. 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. Investors should buy the Australian dollar “on dips” as “there’s no major central bank as hawkish as the RBA,” said Kathy Lien, head of foreign-exchange research at the online currency-trading firm GFT Forex, in an interview in Sydney. The Bank of England, European Central Bank and Federal Open Market Committee are all scheduled to meet this week. The South Pacific currencies earlier dropped to their weakest in more than three weeks against the yen as so-called stop-loss orders were activated, said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. Stop Loss “Stop-loss orders set by margin traders were triggered almost on all cross-currencies, accelerating the pace of declines of these currencies,” against the yen, Kudo said. “For instance, such orders were triggered at below the 80.50 yen mark for Aussie.” A stop-loss order is an automatic instruction to sell or buy a currency should it reach a particular level. Futures traders cut their bets that the Australian dollar will gain against the U.S. dollar, figures from the Washington- based Commodity Futures Trading Commission show. This is the first fall in bets on a gain in the Aussie since September. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- was 52,887 on Oct. 27, compared with net longs of 53,990 a week earlier. Australian government bonds fell, ending four days of gains. The yield on 10-year notes rose three basis points, or 0.03 percentage point, to 5.53 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 0.212, or A$2.12 per A$1,000 face amount, to 97.964. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell for a sixth session to 4.49 percent. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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