By Candice Zachariahs

March 24 (Bloomberg) -- The Australian and New Zealand dollars gained for an 11th day, the longest winning streak since at least July 2007, as a U.S. plan to rid banks of toxic assets boosted speculation the global recession may abate.

The currencies touched the strongest in four months against the yen as Asian stocks extended a global rally, taking the MSCI World Index to a five-week high on U.S. plans to fund purchases of as much as $1 trillion in illiquid real-estate assets. New Zealand’s currency pared gains against the dollar as Finance Minister Bill English said the nation faces “chronic” budget and current-account deficits.

The Obama plan was “given a vote of confidence by the stock market because it contains more details and key private equity players have indicated their willingness to take part,” said Richard Grace, chief currency strategist at the Commonwealth Bank of Australia in Sydney. “That’s a very positive move for the Aussie because it’s positive for global growth.”

Australia’s currency rose 0.3 percent to 70.73 U.S. cents as of 5:20 p.m. in Sydney, near the strongest since Jan. 9, from 70.52 cents late in New York yesterday. The currency advanced 1.6 percent to 69.43 yen, near the highest since November. It touched 51.90 euro cents, the strongest since Feb. 10.

New Zealand’s dollar gained 0.1 percent to 57.21 U.S. cents from 57.17 cents in New York. It bought 56.17 yen, near the most since November, from 55.41 yen.

The Standard & Poor’s 500 index yesterday capped its steepest two-week gain since 1938 as investor Mark Mobius said a new bull market has begun. BlackRock Inc., the largest publicly- traded U.S. asset manager and Carlyle Group, a closely-held private equity firm, expressed support for the U.S. Treasury plan, which depends on the participation of private investors.

Interest Rates

Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S. attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

The extra yield investors get from two-year government debt in Australia versus U.S. Treasuries of similar maturity rose to 1.91 percentage points, while the yield on 10-year borrowings swelled to 1.71 percentage points. That gap for New Zealand three-year debt was at 2.27 percentage points and 2.20 points for 10-year debt.

“The Australia-U.S. yield differential has increased,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy, wrote in a note yesterday. The Australian dollar is “a screaming buy,” they wrote.

N.Z. Recession

New Zealand’s currency may weaken toward 55.50 U.S. cents on concerns that the country’s recession is deepening, said CBA’s Grace. A March 27 report may show the nation’s economy shrank 1.1 percent in the fourth quarter, according to a Bloomberg News survey of economists. Statistics New Zealand also will report current account data on March 26.

“This week’s statistics will show the current account deficit for 2008 is in the order of 9 percent of gross domestic product, one of the worst in the OECD,” English said in parliament today in Wellington.

Australian government bonds fell for a third day. The yield on 10-year notes rose seven basis points, or 0.07 percentage point, to 4.37 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.57, or A$5.70 per A$1,000 face amount, to 107.06.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.56 percent from 3.52 percent yesterday.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

From Bloomberg News.

The Japanese yen declined against the other major currencies today as the Forex traders speculated that the U.S. plan to buy out the toxic assets is going to hurt the «safe haven» currencies, spurring the risk-hungry carry trade.

During the early Asian trading session the U.S. dollar was also bearish against the euro and the pound as the investors dumped it in favor of the more riskier assets. As of now the dollar is rising against the euro as the confidence in the U.S. economy is rising after the American administration unveiled the long-awaited plan to remove the bad debt from the private financial system.

The yen, on the other hand, is very vulnerable to any news that eliminate the risk-aversion. The Japanese economy has already suffered more than U.S. from the ongoing crisis and the only advantage the yen can offer is a safety, which is quite vague and isn’t very sought by the traders when there is chance for the stable carry trade opportunity.

Analysts believe that the U.S. government’s action will increase the money flow into the emerging markets and reduce the global volatility. If the traders won’t be skeptical about these changes, this short relief may become a real long-lasting rally. That’s not a good sign for the Japanese yen and probably has some dangerous risk for the dollar.

USD/JPY went up for the third day today — from 96.94 to 98.25 as of 7:56 GMT. EUR/JPY rose from 132.05 to 133.65 after reaching as high as 134.49 — the maximum since October 21st 2008. GBP/JPY gained from 141.08 to 143.96 today.

The dollar continued its decline against the euro and the pound today as the currency traders believe that the bank help plans by the U.S. administration will boost the demand for the high-yielding assets, including the currencies with higher interest rates.

The U. S. currency wasn’t alone in its depreciation today, the yen declined as well, as its safety became less attractive advantage compared to the relatively high interest associated with some other currencies. The dollar rose slightly against the yen. The markets expect that the Japanese monetary authorities will pour more liquidity into their financial system. Today traders also expect the announcement from U.S. Treasury Secretary Timothy Geithner on providing as much as $1 trillion to buy «toxic assets» out of the U.S. banks.

Analysts believe that the relief brought by the «bad bank» plan will allow the emerging markets to start a long rally with a possible carry trade revival on both dollar and yen based currency pairs. For the Forex market participants this means that the U.S. dollar and the Japanese yen will be more safely located on the short side of their positions.

EUR/USD rose from 1.3656 to 1.3712 as of 7:58 GMT today after opening with a weekly gap from 1.3580. GBP/USD went up from 1.4491 to 1.4607, while USD/JPY advanced slightly from 95.67 to 95.96 today.