The Australian and New Zealand dollars pared losses from the weakest in 2 1/2 months against the yen after Citigroup Inc. agreed to sell a stake to the Abu Dhabi Investment Authority.Citigroup, the biggest U.S. bank, said in a press release it would get $7.5 billion for the sale of as much as 4.9 percent of the company, giving investors more confidence to increase positions in so-called carry trades. The currencies declined more than 2 percent earlier after Goldman Sachs Group Inc. analysts said HSBC Holdings Plc may have to set aside a further $12 billion for bad debts.``The market took the Abu Dhabi news as a positive that there are investors out there willing to invest in financial assets,'' said Jonathan Cavanagh, a currency strategist at Westpac Banking Corp. in Sydney. ``Carry trades picked up and the Aussie and kiwi rallied on the back of that.''The Australian dollar traded at 95.44 yen at 5:10 p.m. in Sydney after falling to 93.01 yen, the lowest since Sept. 10. The currency was at 87.92 U.S. cents after earlier reaching 86.73 cents. New Zealand's dollar was at 82.43 yen from as low as 80.35 yen. It bought 75.93 U.S. cents after touching 74.90 cents.Australia's dollar may reach 88.50 cents and New Zealand's 76.50 cents today, Cavanagh said.The MSCI Asia Pacific Index of regional equities fell 0.3 percent, paring a loss of as much as 2.1 percent.

More Writedowns

Australia's dollar has still declined 5.8 percent against the U.S. currency in November, poised for its steepest monthly loss in six years, as the Standard & Poor's index of U.S. stocks fell 9.2 percent. New Zealand's currency has lost 1.8 percent so far this month, heading for the first decline since August.``There are more writedowns out there and they're going to be bigger than anticipated,'' said Joanne Masters, a currency strategist at Macquarie Bank Ltd. in Sydney. ``I think lower for the Aussie and kiwi,'' she said, referring to the currencies by their nicknames.In carry trades, investors secure funds in countries with lower borrowing costs, such as Japan's 0.5 percent, and buy assets in countries with higher rates, earning the spread between the two. Australia's cost of borrowing is 6.75 percent and New Zealand's is a record 8.25 percent. The risk is that the currency's moves erase those profits.The Australian dollar fell 6.2 percent and New Zealand's slumped 10 percent versus the yen in August after investors shunned stocks and higher-yielding assets because of increasing defaults in U.S. subprime, or higher risk, home loans. That crimped the amount of credit available worldwide and fueled concern U.S. consumer demand and economic growth will slow.Bonds in the two countries rose, with the yield on Australia's 10-year benchmark falling 9 basis points to 5.84 percent. New Zealand's equivalent yield declined 8 basis points to 6.20 percent. Bond yields move inversely to prices and a basis point equals 0.01 percentage point.