Big gains for kiwi and aussie dollar

The Australian and New Zealand dollars climbed versus the greenback and recorded their biggest annual gains since 2003 as prices rose for commodities that dominate the nations' exports.

Both currencies recorded record yearly advances against the yen as the global economic recovery spurred demand for higher-yielding assets and traders speculated that both nations' central banks will raise interest rates this year.

Australia's dollar ended the year at US89.80c. New Zealand's dollar at US72.63c.The aussie advanced 28 per cent this year versus the greenback, and the kiwi gained 25 per cent. Benchmark interest rates attracting investors are 3.75 per cent in Australia and 2.5 per cent in New Zealand, compared with 0.1 per cent in Japan and as low as zero in the US.

Australia's benchmark will rise to 5 per cent by the end of 2010 and New Zealand's will reach 4.5 per cent, while the US rate will increase to 0.75 per cent and Japan's will be unchanged, according to Bloomberg surveys.

New Zealand's two-year swap rate, a fixed payment made to receive floating rates, which is sensitive to interest-rate expectations, was at 4.62 per cent.

- BLOOMBERG