The Australian dollar traded about 0.2 percent below a nine-month high against the yen as investors bet the South Pacific nation will maintain its yield advantage over Japan amid strengthening growth. The so-called Aussie was supported after Reserve Bank of Australia official Philip Lowe said global commodity prices are likely to remain elevated for an extended period and tighter monetary policy in the region may be needed. New Zealand’s dollar was close to its weakest this year against Australia’s after a government report showed producer output prices rose at a slower pace. “The yen is starting to look a little soft, and part of that is widening rate differentials with the rest of the world with the Bank of Japan still happy to keep rates unchanged,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “There are still plenty of reasons to buy the Australian and New Zealand dollars versus the yen.” Australia’s currency traded at 83.87 yen as of 4:20 p.m. in Sydney from 83.95 yen in New York yesterday, when it rose to 84.01, the strongest since May 13. The currency was at $1.0031 from $1.0033. New Zealand’s dollar traded at 63.07 yen from 63.15, and was at 75.46 cents from 75.47 cents. The kiwi traded at NZ$1.3293 per Australian dollar from NZ$1.3287, after falling to NZ$1.3307 on Feb. 15, the weakest since Dec. 29. Benchmark interest rates are 4.75 percent in Australia and 3 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. ‘Persistent’ Change The Australian central bank will increase its key rate by 35 basis points over the next 12 months, while New Zealand’s will boost its benchmark by 48 basis points, according to Credit Suisse AG indexes based on swaps. “What does seem clear is that the world economy is going through a change in relative prices, and that this change is likely to be quite persistent,” Lowe, an assistant governor at the RBA, said today in the text of a speech. “At least for the time being, it would appear that the ability of the world to produce commodities is becoming a key constraint on non- inflationary growth for the global economy.” Commodities including iron ore and dairy products account for the majority of exports for both South Pacific nations and price gains amid demand from nations including China and India helped boost the Aussie and kiwi in 2009 and 2010. Company Forecast Small- and medium-sized companies expect the Australian dollar to trade above parity with the greenback this year, according to a survey by Commonwealth Bank of Australia, the nation’s largest lender. The average forecast is for the currency to peak at $1.06 by March before weakening to $1.02 by year-end, the survey showed. That compares with the median forecast in a Bloomberg survey of analysts for the Aussie to trade at $1 by March and 98 U.S. cents by December. The Commonwealth Bank survey also showed the proportion of importers planning to hedge their currency positions climbed to 63 percent in January from 43 percent in October. The New Zealand dollar has fallen this week against most of its major counterparts on concern the nation’s economic recovery is losing momentum. Producer output prices in New Zealand rose 0.2 percent in the fourth quarter after advancing 1.2 percent in the previous three months, Statistics New Zealand said today. Consumer confidence slumped to a 19-month low, an ANZ-Roy Morgan survey showed. A confidence index fell to 108.1 this month from 117.1 in January, Wellington-based ANZ National Bank Ltd. said. New Zealand’s economy is struggling to accelerate because of consumers’ reluctance to spend and a stronger currency that’s curbing exports, Finance Minister Bill English said today. The nation is one of several that have experienced “greater upward pressure on their currencies than usual,” English said in the text of a speech today. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net. To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net.

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