Australian Dollar Posts Record Two-Day Gain

The Australian dollar soared, posting its biggest ever two-day gains against the greenback and the yen, after governments worldwide announced measures to stabilize financial systems.

The currencies, favorites for so-called carry trades, advanced after U.S. stocks rallied the most since the 1930s on a government plan to buy stakes in banks. France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros ($1.8 trillion) to guarantee loans and buy stakes in lenders.

The Australian dollar jumped 5.1 percent to 70.67 U.S. cents as of 11:11 a.m. in Sydney, from 67.24 cents late in Asian trading yesterday. That extended its two-day advance to 7.1 percent. The currency surged 7.5 percent to 72.61 yen, a two-day gain of 11.2 percent.

New Zealand's dollar
gained 2.6 percent to 62.22 U.S. cents from 60.65 cents late in Asia yesterday. It advanced 4.7 percent to 63.82 yen.

The currencies rose as U.S. stocks staged the biggest rally in seven decades and the Bush administration prepared to announce plans to rescue frozen credit markets. The Standard & Poor's 500 Index rebounded from its worst week in 75 years with an 11.6 percent advance, its steepest since 1939, and the Dow Jones Industrial Average climbed more than 936 points.

Australian stocks rose the most in more than a decade on reports the U.S. government will spend about $125 billion for stakes in nine major banks, according to people briefed on the matter. The institutions include Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc.

The Australian currency has lost 27 percent over the past three months, and New Zealand's is down 18.5 percent. Australia's dollar rose the most since it was freely traded in 1983 versus the greenback on Oct. 13 as traders welcomed coordinated rate cuts by central banks worldwide and efforts by governments to unlock credit markets.

The yen fell for a fourth day against the dollar as the U.S. Treasury prepared to acquire stakes in banks, encouraging investors to add to holdings of high-yielding assets funded in the Japanese currency.

The yen fell to 102.79 per dollar at 9:13 a.m. in Tokyo from 102.01 late yesterday in New York, on course for its longest losing streak in three months. Against the euro, the yen declined to 140.12 from 138.57. The euro rose to $1.3633 from $1.3581. The pound advanced to $1.7441 from $1.7341.

The euro and the pound rose against the dollar after European countries committed $1.8 trillion to guarantee bank loans., Bloomberg
10/13/2008 7:10:39 PM