Australia is one of eight nations that hold stable AAA grades from all three main credit-rating companies. Its 10-year sovereign bond yields are 1.77 percentage points more than the average for the other seven countries.

With A$270 billion ($284 billion) in sovereign debt, Australia has the second-largest government bond market among stable AAAs. That compares with $11.6 trillion for the U.S., which Standard & Poor’s reduced to AA+ in 2011, and $9.2 trillion for Japan, graded AA- by S&P.

“We are seeing corporates, not just from Asia but from Europe, thinking: Where are we going to put our money?” Anne Anderson, head of Asia-Pacific fixed income for UBS Global Asset Management, said at the Bloomberg Australia Economic Summit yesterday. Clients in Europe “look at the yield and they cannot believe that our bond yields are so high,” she said.

Diversifying Reserves

The currency will trade in a range from 85 U.S. cents to $1.15, Anderson said, without specifying a time frame. The Aussie climbed as high as $1.1081 on July 27, 2011, the most since it was freely floated in 1983. The RBA’s 3 percent benchmark rate is the highest among developed nations.

The Aussie has surged 50 percent since the end of 2008 as unconventional easing by nations including the U.S. and Japan, and a debt crisis in Europe prompted investors to diversify away from the dollar, yen and euro.

The Federal Reserve and the Bank of Japan have pledged to purchase about $160 billion in bonds between them every month to spur growth, pursuing so-called quantitative easing that some investors speculate will debase their currencies.

Central banks for the first time used their reserves to buy about the same amount of currencies from Australia and Canada as U.S. dollars at the end of last year, according to International Monetary Fund data released March 29.

A category the IMF calls “other currencies,” which strategists say is dominated by the Aussie and Canadian dollars, rose to a record 6.1 percent of the $6.1 trillion in allocated global reserves. China, the world’s biggest reserve holder, doesn’t report the data to the IMF.

Aussie ‘Floor’