Australian Dollar Advance on Widening Yield Premiums


The Australian dollar rose for a second day as investors bought the nation bonds because they yield the most versus U.S. Treasuries in two decades.

The currency climbed against the dollar as traders increased bets Australia's central bank will raise borrowing costs next month. Aussi also gained against the yen as rising stocks gave investors confidence to buy higher-yielding assets with funds from Japan.

The Australian dollar was at 87.06 U.S. cents as of 1:17 p.m. in Sydney, compared with 86.57 cents in late Asian trading yesterday. It jumped 1 percent to 92.63 yen.

The currency appreciated as a plan to bail out U.S. bond insurers pushed the Standard & Poor's 500 Index up 2.1 percent, encouraging so-called carry trades. The MSCI Asia Pacific Index climbed 1.5 percent after the New York State regulators met with banks to discuss raising new capital for the insurers, restoring confidence in the financial system.

Australia's dollar has gained three straight years against the yen as the nation interest-rate advantages over Japan encouraged carry trades.


TradingEconomics.com, Bloomberg
1/23/2008 8:58:58 PM