By Theresa Barraclough and Garfield Reynolds Feb. 26 (Bloomberg) -- The Australian dollar climbed versus the yen as an increase in bank lending added to the case for the South Pacific nation’s policy makers to raise borrowing costs next week. The Aussie headed for the first monthly gain against the U.S. currency since November as reports this week showed lending rose in January and business investment rebounded in the fourth quarter. New Zealand’s dollar headed for a second monthly decline as a government report showed home-building approvals fell for a second month in January. “Data out of Australia justifies a rate hike next week,” said Masafumi Yamamoto, chief foreign-exchange strategist in Tokyo at Barclays Plc, Britain’s second-largest bank. “The Australian dollar will gain versus the dollar and the yen.” Australia’s currency advanced to 79.59 yen at 11:52 a.m. in New York, from 79.13 yen yesterday. The currency rose 0.8 percent to 89.5760 U.S. cents from 88.83 cents yesterday. New Zealand’s dollar rose 0.8 percent to 62.14 yen from 61.63 yen yesterday. It traded at 69.95 U.S. cents from 69.18 cents yesterday. The Aussie and Kiwi headed for a weekly decline versus the greenback as concern Greece’s credit ratings will be cut trimmed demand for riskier assets. “The Australian dollar remains hostage to investor risk- appetite, which will continue to be under pressure while sovereign debt default concerns worsen and economic reports in the major economies disappoint,” John Kyriakopoulos, head of currency strategy at National Australia Bank in Sydney, wrote in a note to clients. Bank Lending Loans provided by banks and other finance companies gained 0.4 percent in January, after rising 0.3 percent the prior month, the Reserve Bank of Australia said in Sydney today. Capital spending advanced 5.5 percent from the previous quarter, when it fell a revised 5.2 percent, the Bureau of Statistics said in Sydney yesterday. “Australia’s strong economic fundamentals are irrefutable,” Annette Beacher, senior strategist at TD Securities Inc. in Singapore, wrote in a research report. “We believe the RBA’s finely balanced judgment will tip the decision toward a 25 basis point hike next week.” Eight of the 17 economists surveyed by Bloomberg News said the RBA will lift rates to 4 percent on March 2. 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. To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net; Garfield Reynolds in Sydney at greynolds1@bloomberg.net.

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