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Australian Bonds Fall as Yields Climb to March ’12 High on Syria

Australian bonds fell, sending the 10-year yield to the highest since March 2012, as optimism the U.S. won’t carry out air strikes on Syria boosted risk appetite.

U.S. President Barack Obama called for a pause in authorizing a military strike on Syria for the country’s use of chemical weapons against civilians. Australia’s dollar retreated from its highest level since July before a report tomorrow forecast to show the unemployment rate in the country rose. New Zealand’s dollar fell from a three-week high.

“If the possibility of strikes against Syria continues to ease, that’s going to be positive for risk appetite,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “In the medium term, we see more downside risk for the currency. There’s a possibility that unemployment rate could tick up” in Australia, Chan said.

The yield on Australia’s benchmark 10-year bond gained four basis points, or 0.04 percentage point, to 4.17 percent as of 4:39 p.m. in Sydney, after earlier touching 4.20 percent, the highest level since March 2012.

Australia’s dollar fell 0.3 percent to 92.86 U.S. cents from yesterday, when it reached 93.19, a level unseen since July 24. The currency declined 0.3 percent to 93.21 yen from yesterday, when it jumped 1.7 percent.

New Zealand’s dollar weakened 0.3 percent to 80.46 U.S. cents from yesterday, when it touched 80.76, the strongest since Aug. 19. The kiwi slid 0.3 percent to 80.76 yen.

The MSCI Asia Pacific Index of shares was little changed from yesterday, when it rose 1.2 percent for its ninth-straight advance, the longest rally this year.

Syria Plan

In a nationally televised speech from the White House, Obama said he’d asked Congress to delay a vote authorizing the use of military force while the administration pursues a proposal that would have Syria surrender its chemical arms.

“We will work together in consultation with Russia and China at the UN Security Council” to get rid of Syrian chemical weapons and to “ultimately destroy them under international control,” Obama said.

“There is still a risk on the table of a military strike, but it has certainly been reduced over the last few days,” David Forrester, a senior vice president for Group of 10 currency strategy at Macquarie Bank Ltd. in Singapore, said in Bloomberg Television interview.

Business Confidence

In Australia, the consumer confidence sentiment index for September climbed 4.7 percent to 110.6, the highest since December 2010, a Westpac Banking Corp. and Melbourne Institute survey taken Sept. 2-8 of 1,200 adults showed today in Sydney. A figure above 100 indicates optimists outnumber pessimists.

National Australia Bank Ltd.’s gauge of business confidence jumped to a reading of 6 in August, the highest since May 2011, and up from minus 3 the previous month, the bank said yesterday, based on a survey of more than 600 companies taken Aug. 20 to Sept. 3.

Demand for the Aussie was limited ahead of tomorrow’s employment report. Statistics bureau data may show the jobless rate rose to 5.8 percent in August, the highest in four years, and up from 5.7 percent the previous month, according to the median estimate of economists surveyed by Bloomberg. Economists in a separate Bloomberg poll estimate the number of people employed increased by 10,000 last month from July, when it decreased by 10,200.

The Reserve Bank of New Zealand meets tomorrow, and all 15 economists surveyed by Bloomberg expect policy makers to keep overnight cash rate unchanged at 2.5 percent.

RBNZ Governor Graeme Wheeler said after the last policy meeting on July 25 future interest-rate increases will depend on the booming housing market’s impact on prices and reiterated the central bank will keep borrowing costs at a record low this year.

The nation’s two-year swap rate, a fixed payment made to receive a floating rate, was unchanged at 3.51 percent.

“The RBNZ’s last statement had a bit of a more hawkish flavor,” said St. George’s Chan. “Comments tomorrow are going to be closely watched whether that would be reiterated. There is some risk for the kiwi dollar.”

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