Sydney, March 4 (Bloomberg) -- The Australian dollar rose to its highest since March 2000 on expectations the central bank will stand pat on interest rates, preserving the 3.5 percentage point gap between the local benchmark rate and its U.S. counterpart. The Australian dollar bought 61.45 U.S. cents at 4:36 p.m. in Sydney after rising as high as 61.49 cents in late New York trading yesterday. It has risen 9.4 percent this year and is the world's best-performing of 59 currencies tracked by Bloomberg. Australia's central bank board met today to review its benchmark 4.75 percent interest rate and announces any change tomorrow. One out of 22 economists surveyed by Bloomberg News expect the bank to cut the rate.
``While yield is a well-worn story, it remains a pretty relevant theme,'' said Richard Yetsenga, a currency strategist at Deutsche Bank AG in Sydney. The Australian dollar may rise to 62.50 U.S. cents in the next three months, he said. Yetsenga recommended buying Australian dollars in February, when the currency was below 60 U.S. cents. The Federal Reserve's target for the overnight lending rate between banks is 1.25 percent. Australian government bonds rose after a U.S. report showed an expansion in manufacturing slowed last month more than analysts had forecast, signaling the world's largest economy, and Australia's second-largest export market, may not rebound anytime soon.
Rising Bonds
The 6.5 percent bond maturing in May 2013 rose 0.649, or A$6.49 per A$1,000 face amount, to 111.829. Its yield fell 8 basis points to 5 percent, after dipping to 4.98 percent, its lowest since March 15, 2001. A basis point is 0.01 percentage point. ``The main driver is what's happening in the U.S.'' economy, said Peter Munckton, a debt market strategist at Commonwealth Bank of Australia. ``The pickup in the U.S. economy hasn't been as strong as people were hoping for and is taking a long time to happen.'' Economists are divided on the outlook for interest rates beyond this month. Five of the 22 economists polled late last week expect rates to be lower by December. Six expect rates to be higher and 11 expect the rate will be unchanged. ``Every step up in the currency is going to work against rate rises, or add to the case for a rate cut,'' said Warren Hogan, head of bond strategy at Credit Suisse First Boston. ``We expect 75 basis points of rate cuts starting in August.'' //www./quote.bloomberg.com