Australia's dollar gained for a sixth day as the UBS Bloomberg Constant Maturity Commodity Index climbed to a record last week. Raw materials including gold account for about 60 percent of Australia's exports.
The Australian dollar advanced to 95.55 U.S. cents at 11:01 a.m. in Sydney from 95.32 cents late in New York on June 20. It risen 9.2 percent this year. The currency strengthened to 102.52 yen from 102.32 yen. It has risen 4.8 percent this year and 12.6 percent this quarter.
Prices for coking and thermal coals, iron ore and crude oil have all risen to records this year, leading to two central bank interest-rate increases since January to curb inflation. Traders expect the Reserve Bank of Australia will raise its benchmark by 34 basis points in the next 12 months, according to a Credit Suisse Group index based on trading in interest-rate swaps.
Benchmark rates are 7.25 percent in Australia and 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the Australian and New Zealand currencies a favorite for the so-called carry trade.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.