By Candice Zachariahs Oct. 26 (Bloomberg) -- The Australian dollar rose, snapping two days of declines, as gains in Asian equities boosted demand for higher-yielding assets. New Zealand’s was little changed. Australia’s currency advanced as Toyota Industries Corp.’s unexpected profit boosted earnings prospects for automakers, pushing up stock markets in Japan and South Korea. Gains in the so-called Aussie were tempered before government data due Oct. 28 that may show third-quarter consumer price gains slowed, reducing the central bank’s need to raise interest rates to keep inflation in its target range of between 2 and 3 percent. “The high-yielding currencies will be well and truly underpinned while the outlook remains positive,” said Ian Fowler, a senior dealer at the online foreign-exchange firm OzForex Ltd. in Sydney. A consumer price inflation number “within the RBA’s target might cool the heels of the Aussie dollar bulls, but again that will only be temporary.” Australia’s currency rose 0.2 percent to 92.40 U.S. cents as of 3:07 p.m. in Sydney from 92.24 cents in New York last week. The currency traded at 84.82 yen. New Zealand’s dollar bought 75.42 U.S. cents from 75.45 cents last week. It declined 0.3 percent to 69.23 yen. Liquidity in the New Zealand currency may be low today with markets there closed for Labor Day, Fowler said. Rates, Prices Australia’s producer prices index advanced 0.1 percent from the second quarter, when it fell 0.8 percent, the Bureau of Statistics said in Sydney today. The median estimate of 17 economists surveyed by Bloomberg was for a 0.3 percent gain. 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. Reserve Bank of Australia Governor Glenn Stevens is forecast to raise the benchmark rate to 3.5 percent when policy makers meet Nov. 3 by 17 of the 22 economists in a Bloomberg News survey. Four expect a 50 basis point increase and one predicts no change. The “inflation number will be very important to the size and timing of the RBA hiking,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland in Sydney. Declines in the currency “are a buying opportunity,” he said. “The relative growth performance in Australia remains very robust so you would say any weakness in the Aussie isn’t something that will last,” Gibbs said. China, Futures China, Australia’s largest trading-partner this year, said it increased imports of the coal in September to meet rising domestic consumption. Purchases rose 7 percent to 12.55 million metric tons last month and were more than triple what the country imported a year earlier, according to data from the customs office in Beijing today. Commodities, including coal and iron ore, make up more than 50 percent of Australia’s exports. Futures traders increased their bets that the Australian dollar will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 53,990 on Oct. 20, compared with net longs of 52,647 a week earlier. Australian government bonds were little changed with the yield on 10-year notes at 5.71 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.005, or A$0.05 per A$1,000 face amount, to 96.682.

Source