The local dollars surged the most in more than six weeks against the yen, as the plan to pump $200 billion into the financial system to avert a credit crunch spurred demand for so- called carry trades. The New Zealand and Australian currencies pared a loss this month against the U.S. dollar as investors were lured by the nations' interest rates of 8.25 percent and 7.25 percent respectively.
``Risk appetite had a shot in the arm from the liquidity measures,'' said Michael Gordon, currency strategist at Westpac Banking Corp. in Wellington. ``It's a positive move for riskier currencies like the'' New Zealand and Australian dollars.
New Zealand's dollar, also known as the kiwi, bought 80.38 U.S. cents at 6:42 p.m. in Wellington, from 79.88 cents in late Asian trading yesterday. The currency surged as much as 2.2 percent to 83.30 yen before trading at 82.76.
The Australian dollar climbed to 93.17 U.S. cents from 92.37 cents late in Asia yesterday. It jumped as much as 2.2 percent to 96.31 yen before buying 95.92.
The Fed coordinated the effort with central banks in Europe and Canada, which plan to inject up to $45 billion into their banking systems. Australia's central bank yesterday injected A$1.7 billion ($1.58 billion) into the financial system via so- called repurchase agreements to encourage bank lending, almost double the daily average for this year.
Higher-Yielding Currencies
The Australian and New Zealand dollars are considered higher-yielding currencies because their nation's benchmark interest rates compare with a 3 percent rate in the U.S. and 0.5 percent in Japan.
The currencies also gained as U.S. stocks rallied the most in five years, giving investors' confidence to get funds in a country with low borrowing costs and invest in another with higher rates, earning the spread between the two.
read more:N.Z., Australian Dollars Rise; Fed Measures Buoy Risk Appetite
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