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Aussie, Kiwi Strengthen Versus Yen After Merkel, Sarkozy Meeting

The Australian and New Zealand dollars strengthened against the yen as Asian stocks rose for a second day after the leaders of Germany and France made progress on plans that seek to solve Europe’s debt crisis.

The so-called kiwi rose to the highest in more than one month against the greenback as the leaders of Europe’s two largest economies said the new budget rulebook for nations in the euro area may be ready a month ahead of schedule, spurring investor appetite for riskier assets. Gains in the South Pacific currencies were limited before a report forecast to show export growth in China was the slowest in two years.

“There’s a little bit of improved risk sentiment out there,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The market underestimates the determination of European leaders to find a solution.”

Australia’s dollar advanced 0.4 percent to 78.99 yen as of 1:07 p.m. in Sydney from yesterday in New York. It climbed 0.4 percent to $1.0282.

New Zealand’s currency earlier touched 60.88 yen, the highest since Dec. 5, before trading at 60.87, 0.6 percent above yesterday’s close. It advanced 0.7 percent to 79.24 U.S. cents. It earlier reached 79.26, the highest since Nov. 14.

Australia’s government bonds declined, pushing the yield on the 10-year security up three basis points, or 0.03 percentage point, to 3.77 percent.

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.8 percent.

‘Major Challenge’

German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin yesterday to discuss how to implement the new “fiscal compact” agreed to at a Dec. 9 summit of European leaders.

“This is a major challenge constitutionally for the European Union to change its states’ budgetary processes, so this will take time,” said ANZ’s Salter. “We wouldn’t be strong sellers at current levels of Aussie and kiwi. If the Aussie were to rally into $1.04, we would recommend to our clients to sell into that.”

Merkel said Greece would be the focus of talks today in Berlin with International Monetary Fund Managing Director Christine Lagarde. “We want Greece to stay in the euro,” Merkel said at a joint press conference with Sarkozy yesterday following their meeting.

Building Approvals

The Aussie maintained its advance after a report showed Australian home-building approvals (AUBAC) advanced more than economists had forecast in November. The number of permits granted to build or renovate houses and apartments gained 8.4 percent from October, when they fell a revised 10 percent, the Bureau of Statistics said in Sydney today. The result compares with the median forecast for a 6 percent gain in a Bloomberg News survey.

Australian and New Zealand dollar gains were limited ahead of a report that may indicate China’s export-driven economy is slowing. Excluding distortions in January and February each year related to the Lunar New Year, overseas shipments probably increased in December by the least since export growth resumed in December 2009, according to a Bloomberg survey of economists. The median estimate is for a 13.4 percent gain.

“In terms of Aussie and kiwi, we’re watching what happens in China as a guide,” said Emma Lawson, a currency at National Australia Bank Ltd. in Sydney. “A big surprise today would be if trade data come in better than expected, although the market would take it quite negatively in Aussie and kiwi if it comes in a lot worse than expected.”

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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