Australia's dollar was the biggest gainer among major currencies as US and European traders returned from summer holidays on Tuesday, jumping almost 1 percent after the central bank said little on its 10 percent rise since January. The dollar, euro and yen were all trading in tight ranges after a surge for the yen on the back of comments by Bank of Japan Governor Haruhiko Kuroda on Monday which acknowledged the problems created by running negative interest rates.
Data on Australian government spending and its current account deficit pointed to solid economic growth last quarter, and the Reserve Bank of Australia as expected kept interest rates on hold. At Governor Glenn Stevens' last meeting, the bank made little reference to the concerns over the Aussie's strength that have spotted the last two years of policymaking. "Domestic and global growth along with inflation was the headline (rather than the dollar)," said Tobias Davis, Head of Corporate Treasury Sales with Western Union in London.
"One perhaps could have expected some more discussion of the currency, but we probably need to get back above 0.80 for verbal intervention to come back into flavour." In morning trade in Europe, the Aussie traded as much as 0.9 percent higher at $0.7655. The US dollar was trading at 103.28 yen, having fallen from Friday's one-month high of 104.32.
With dealers and investors searching for the currency trade that will dominate the next month or two, upward pressure on the yen continues in the absence of much clarity on the chances of a rise in US interest rates by the end of the year. This month's round of major central bank meetings, starting with the European Central Bank on Thursday, may offer some new direction.
Though Kuroda signalled his readiness to expand an already massive stimulus programme in his speech on Monday, he did not provide any explicit hints on the chances of the BOJ aggressively easing policy at its September meeting. "Explicit guidance that the 'Comprehensive Assessment' will result in additional easing will limit the upside for the yen in response to an unchanged policy announcement on 21st September," Bank of Tokyo Mitsubishi UFJ analyst Derek Halpenny said. "But yen strength seems inevitable if we are correct and the BoJ fails to act this month."