By Candice Zachariahs Jan. 28 (Bloomberg) -- The Australian and New Zealand dollars advanced from a more than one-month low against the yen as Asian equities ended eight days of declines. The currencies also gained on speculation their losses have been too rapid. Against the yen this month, the so-called kiwi dropped 5 percent and the Aussie slid 2.9 percent. New Zealand’s dollar earlier fell against the greenback as central bank Governor Alan Bollard said he expected to keep the key interest rate at a record low until the middle of the year. “Both Aussie and kiwi certainly have a fair bit more upside, particularly over the next six months,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney, in a Bloomberg Television interview. “Japan is the safe-haven play and it’s a safer world.” Australia’s currency rose 1 percent to 81.37 yen as of 2:49 p.m. in Sydney from 80.59 yen in New York yesterday, when it touched 79.86 yen, the least since Dec. 21. The Aussie rose 0.6 percent to 90.04 U.S. cents. New Zealand’s dollar climbed 0.8 percent to 64.10 yen from 63.57 yen yesterday, when it fell as low as 62.76 yen, the weakest since Dec. 9. It gained 0.4 percent to 70.93 cents. The Australian dollar will climb to 98 cents by June while New Zealand’s currency will gain toward 79 cents as benchmark interest rates in both countries reach 5 percent by year-end, Capurso said. Removing Stimulus Benchmark interest rates are 2.5 percent in New Zealand and 3.75 percent in Australia, compared with 0.1 percent in Japan and as low as zero percent 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 earlier fell as Bollard left the official cash rate unchanged at 2.5 percent at the end of today’s meeting and said inflation is likely to remain within the bank’s target range during the medium term. “If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010,” he said in a statement accompanying the decision. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.41 percent. “Markets have the first rate hike fully priced for April and we may see some of that tightening priced out,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. The statement may be “another headwind” for the kiwi dollar, he said. ‘Corrective’ Mode Australia’s dollar has fallen 4.5 percent since touching 94.06 cents, the strongest since August 2008, on Nov. 16. The market is in “a corrective mode,” said Joe Prendergast, managing director and chief currency strategist at Credit Suisse Private Banking in Zurich, speaking in a Bloomberg Television interview. “In about six months, we will see the Aussie test the upside again.” Australia’s currency will approach parity with the U.S. dollar over that period, Prendergast said. Australian government bonds fell. The yield on the benchmark 10-year notes gained seven basis points, or 0.07 percentage point, to 5.47 percent, according to data compiled by Bloomberg. The 5.25 percent security due March 2019 slipped 0.50, or A$5 per A$1,000 face amount, to 98.41. ---With assistance from Ron Harui and Haslinda Amin in Singapore and Susan Li in Hong Kong. Editors: Nate Hosoda, Rocky Swift To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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