By Candice Zachariahs Dec. 11 (Bloomberg) -- The Australian and New Zealand dollars headed for their second weekly advance as China said industrial production and new lending rose more than forecast, boosting demand for higher-yielding assets. New Zealand’s dollar is poised for its biggest weekly gain in a month after Reserve Bank Governor Alan Bollard yesterday said he expected to begin raising interest rates around the middle of 2010. Demand for the currencies, little changed today, was also supported as Asian stocks rallied after reports yesterday showed fewer Americans filed for jobless benefits. “Overall, it’s a good set of numbers for risk appetite, regional economies, equities and the Aussie dollar,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp, referring to the Chinese data. After the central bank statement yesterday “New Zealand’s yields have risen steeply and that’s certainly a positive for the currency.” Australia’s dollar traded at 91.62 U.S. cents as of 4:20 p.m. in Sydney from 91.66 cents in New York yesterday and 91.47 at the end of last week. It rose 0.7 percent to 81.38 yen today. New Zealand’s dollar was at 72.69 U.S. cents from 72.87 yesterday, headed for a 1.5 percent gain this week. The currency bought 64.57 yen from 64.27 yen. China’s factory output climbed 19.2 percent in November from a year earlier, accelerating from 16.1 percent growth in October and more than the 18.2 percent median estimate of economists in a Bloomberg News survey. China is Australia’s largest trading partner. Betting on China “Long Australian-dollar exposure is essentially equivalent to a bet on continued growth in China,” Michael Hart, a currency strategist at Citigroup Inc. in London, wrote yesterday in a report. Chinese growth “is likely to support commodity prices and keep Australian investment running at record levels.” The currency will reach parity with the U.S. dollar over three months, the bank forecasts. Benchmark interest rates are 3.75 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. The New Zealand dollar also headed for a weekly gain as futures markets bet the Reserve Bank will increase the benchmark rate by at least 25 basis points by March, according to Bloomberg data. ‘Tightening Bias’ “The market has read the RBNZ’s move to mid-2010 as a tightening bias lifting rates and the currency,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. “The bias is to the upside for the kiwi while the Aussie is struggling around 92 cents,” he said. The New Zealand dollar may rise to 73.11 cents, while the Aussie may advance to 92.11 cents, Sinton said. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.65 percent from 4.35 percent at the end of last week. Australian government bonds fell for a third day. The yield on the benchmark 10-year note rose two basis points, or 0.02 percentage point, to 5.52 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.148, or A$1.48 per A$1,000 face amount, to 98.032. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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