SYDNEY/WELLINGTON: The Australian and New Zealand dollars scaled their highest against the yen in more than four years on Tuesday on the view that the flood of low-yielding yen from Japanese monetary easing may end up in higher-yielding assets abroad.
Aussie climbs 2.3 pct to around 103.57 yen, its highest since July 2008. It is now up 6 full yen since the BOJ announced its easing plans last Thursday. Next target is around 104.50 yen, its 2008 peak.
Kiwi also pushes up 2.3 pct to a five-year high around 84.12 yen. Not much chart resistance until 88 yen.
Yen sinks to a near four-year trough versus the US dollar around 99.49 yen on expectations aggressive quantitative easing in Japan will ramp up carry trades, where investors borrow in the low-yielding yen to buy higher-yielding assets.
Aussie, kiwi may be big beneficiaries of such trades, as their interest rates of 3.0 percent and 2.5 percent respectively, are the highest among major currencies.
Market participants expect yen selling to continue as investors target the psychologically key 100 yen level in dollar/yen. A fall in the yen beyond that level could trigger more selling in the Japanese currency versus the Aussie, kiwi.
Aussie, kiwi could extend gains across the board later in the day if business confidence surveys from New Zealand and Australia show that sentiment continues to improve.
Gains versus the yen lifted the Aussie against the US dollar to $1.0424, pulling away from a three-week low of $1.0351 hit on Monday.
The Aussie may gain more if it holds above the 100-day MA of $1.0411. But further upside may be limited by options expiries seen around $1.0450. Support seen at $1.0352, the 38.2 percent retracement of its March-April rally.
The kiwi rallied to a seven-week high of $0.8475, pushing the currency to a lifetime high versus a currency basket of 78.14. It outperforms the Aussie, which stumbles to a six-week low around NZ$1.2275.
The New Zealand currency was bolstered after the Reserve Bank of New Zealand on Monday warned that it may need to raise interest rates if the country's overheated housing market doesn't cool down on its own.
A push above $0.8450 suggests that the kiwi is now supported above $0.8400. Offers seen around $0.8500 expected to cap near-term gains.
Australian government bonds slip, with the three-year contract indicated down 0.060 points at 97.170, while the 10-year contract falls 0.055 points to 96.725.
New Zealand government bonds ease in early trade prodding yields 2 basis points higher at the short end of the curve.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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