Aussie extends gains as commodities rebound on Fed outlook

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(Bloomberg) -- The Australian and New Zealand dollars and South Africa’s rand advanced, defying comments from Federal Reserve officials that they’re still ready to tighten policy this year. Traders have cut the probability of a Fed liftoff by December to 39 percent from 66 percent on June 30. The currency gains marked a rebound from a third-quarter rout that saw the Bloomberg Commodity Index tumble the most since the global financial crisis.

“We’re more positive about commodity currencies in the medium term as they’ve weakened significantly since May and a lot of bad news is already in the price,” said Roberto Mialich, senior Group-of-10 currency strategist at UniCredit SpA in Milan, which told clients on Oct. 8 to buy Canadian dollars against the U.S. currency. “Another key factor that supported them is that the broad-based dollar momentum is no longer there, as the market cut back on Fed fund rate expectations.”

The People’s Bank of China raised its yuan reference rate amid speculation the world’s second-biggest economy will add to targeted stimulus measures as it seeks to reach its annual growth target. In the U.S., Fed Vice Chairman Stanley Fischer said on Sunday that the economy may be strong enough to merit a rate increase in 2015.

Longest Run

Australia’s dollar rose for a ninth day, its longest stretch of gains since 2009. It climbed 0.4 percent to 73.64 U.S. cents as of 7:05 a.m. in New York, after touching an almost two-month high of 73.68. The Aussie advanced 4.1 percent last week, the most since December 2011.

New Zealand’s kiwi gained 0.5 percent to 67.21 U.S. cents, having also reached a two-month high earlier and climbing last week by the most in almost four years.

The rand strengthened 0.5 percent to 13.281 per U.S. dollar as Bloomberg’s gauge of raw-materials prices rose for a third day, fueled by gains in oil and copper.

Dollar Stalling

Fischer’s not alone in stoking speculation the Fed will raise its zero to 0.25 percent main rate this year. Chair Janet Yellen has suggested the same, while Atlanta Fed President Dennis Lockhart said Friday he still anticipates higher borrowing costs by December.

Their message is struggling to get through after weaker- than-forecast September payrolls data fueled concern the labor- market recovery is stalling. The Bloomberg Dollar Spot Index, which measures the U.S. currency against 10 major counterparts, dropped as much as 0.2 percent to a three-week low.