Aussie & kiwi dlrs resume yen rise, wallow near lows on USD

WELLINGTON/ SYDNEY: The Australian and New Zealand dollars resumed their climb against a soggy yen on Tuesday after a US government official voiced support for Japan's efforts to end stubborn deflation, even while cautioning against deliberate devaluations.

The Aussie, however, drifted to three-month lows on the US dollar and lost ground to the euro.

The Australian dollar surged as far as 96.87 yen in sight of the four-and-a-half year peak of 97.42 set last Tuesday.

It last fetched 96.57 yen, having jumped nearly two yen in 24 hours after US Treasury official Lael Brainard said the United States supported Japanese efforts to end deflation and re-invigorate growth.

Traders took the remark as lessening the risk the US, or other G7 countries, complaining about the falling yen at G20 meeting later this week.

Still, Matthew Johnson, a rate strategist at UBS, believes the Aussie will struggle to hold at these high levels against the yen.

"An Aussie/yen above 95 yen encourages Japanese funds to sell Australian assets and book a nice profit."

The kiwi rose to 78.90 yen, closing in on four-year peak of 79.41 hit last week and showing a jump of 1.6 percent since Monday.

The Aussie and kiwi have gained more than 17 percent since November on the belief that true reflation in Japan means a much weaker yen.

The BoJ holds its policy meeting on Wednesday and Thursday where it is expected to keep policy steady. Markets, however, are pricing in much more aggressive easing once a new governor is installed.

With all the action on the yen, the Aussie wallowed near multi-month lows against its US counterpart, having dipped as far as $1.0240, its weakest since Oct. 24.

Immediate support was seen as $1.0236, the Oct. 23 low, with traders reporting export bids around $1.0220. Charts suggest more downside with the moving average studies pointing south.

An improvement in Australian business confidence in January provided little comfort to the Aussie as the private survey also showed firms reporting weakness in hiring which might bode ill for unemployment.

The New Zealand dollar did better, managing a slight lift to $0.8369, from $0.8345 in late local trade on Monday, though holidays across much of Asia kept flows rather thin.

"The kiwi is just consolidating above 83 cents, where it has been for the last couple of days. We have some good exporter demand down there," said Tim Kelleher, head of institutional FX sales at ASB.

"We are really at the mercy of offshore moves," he said, expecting the kiwi to range around $0.8325-$0.8400 this week.

The latest data on housing and retail spending did not alter market expectations for the rate outlook, with pricing implying about 20 basis points of rate increases over the next 12 months.

Electronic card retail spending edged up for the fourth straight month in January, when house prices fell one percent from the previous month but up 7.2 percent from the same month a year earlier. And New Zealand government bonds were softer, with yields nudging up one basis point across the curve.

Australian government bond futures eased with the three-year contract 0.01 points lower at 97.220 and the 10-year contract off 0.020 points at 96.560.