Wednesday, 21 November 2012 10:05
SYDNEY/WELLINGTON: The Australian and New Zealand dollars hit seven-month highs against the yen on Wednesday as expectations for more aggressive Japanese monetary easing action bolstered the view that the Antipodeans would keep their rate advantage over the yen.
Aussie climbs to around 85.05 yen according to Reuters data, its highest since early April. Kiwi edges up to around 66.85 yen, a level also not seen since April.
Expectations rise that a new Japanese government after a Dec. 16 vote could push the Bank of Japan toward more forceful monetary stimulus. This would keep Japanese interest rates chained to zero for longer, much lower than 3.25 pct in Australia, 2.5 pct in NZ.
Despite gains vs yen, Aussie, kiwi slip vs US dollar as comments from Federal Reserve Chairman Ben Bernanke about the damaging impact of US fiscal problems weighs on riskier assets, including stocks and the higher-yielding Antipodeans.
Fed Chairman Ben Bernanke said the Fed does not have the tools to offset the damage that would result if politicians fail to strike a deal to prevent going off the fiscal cliff.
Aussie slips 0.1 pct on the day to $1.0379, as investors also sell the currency after RBA minutes on Tuesday showed the central bank was still open to rate cuts.
That is in line with market expectations, with interbank futures factoring in a 50-50 chance of a cut in Dec and swaps pricing in a 60 percent chance of an easing.
Since May, the RBA has lowered its cash rate by a total of 100 basis points, taking it to a three-year low at 3.25 percent.
Also keeping Aussie on backfoot are comments from RBA Governor Glenn Stevens, who on Tuesday tried to dampen talk of "passive intervention" to weaken AUD when questioned about the recent increase in the bank's foreign asset holdings.
Kiwi edges down 0.1 pct to $0.8161 after a test of $0.8200 in offshore trade lost steam at $0.8198, prompting investors to sell the currency. Still, it has gained more than a cent since plumbing a 2-1/2 month trough last week after weak NZ jobs data.
Further losses limited by a rise in NZ dairy prices at Fonterra's fortnightly dairy auction. But overall prices only rise 0.7 pct, suggesting that their upward momentum may have lost steam which may weigh on the kiwi.
Aussie outperforms kiwi, inches up to NZ$1.2720, recovering from a one-week low around NZ$1.2680 hit on Tuesday.
Antipodeans softer against the euro as euro zone finance ministers look set to approve the next tranche of loans for debt-laden Greece.
Australian government bond futures lower, with the three-year contract down 0.050 points at 97.360 and the 10-year contract 0.060 points lower at 96.860.
NZ government bonds dip, sending yields around 3 basis points higher.
Copyright Reuters, 2012