SYDNEY/WELLINGTON: The Australian and New Zealand dollars surged against the yen to fresh four-year heights on Tuesday as markets wagered massive monetary stimulus in Japan would lift demand for higher-yielding assets globally.
They also found support after data showed Chinese inflation cooled in March, leaving policymakers room to keep monetary conditions loose to nurture a burgeoning economic recovery.
Aussie climbs to 103.81 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. It has gained nearly 15 pct this year.
Kiwi jumps to a five-year high around 84.49 yen, its strongest since March 2008 and up an impressive 20 pct since January 1. Not much chart resistance until 88 yen.
Yen sinks to a four-year trough vs the USD around 99.67 yen on expectations aggressive quantitative easing in Japan will ramp up carry trades, where investors borrow cheaply in 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.
Aussie gets a fillip against the US dollar from the reassuring Chinese inflation data as the Asian giant is Australia's single biggest export market.
Aussie at $1.0432, up from a $1.0348 trough overnight, but still short of the 2-1/2-month peak of $1.0498 set last week. Traders cite options expiries around $1.0450, ahead of $1.0500, a level that has proved tough to break.
Support seen at $1.0352, the 38.2 pct retracement of its March-April rally.
The kiwi rallies to a seven-week high of $0.8497, which in turn lifts it to a lifetime high in trade weighted terms at 78.30.
Kiwi outperforms the Aussie, which stumbles to a six-week low around NZ$1.2265. Kiwi support seen at $0.8400 with offers at $0.8500.
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.
Data on Tuesday showed NZ home prices hit a record high in March having climbed 6.5 percent for the year, though there were some signs the rate of growth was slowing.
In Australia a survey showed businesses reported the weakest activity levels in four years in March as sales and employment slipped, yet firms grew more optimistic on the outlook at least in sectors sensitive to lower interest rates.
Australian government bonds softer after a strong run. The three-year contract down 0.02 points at 97.210, while the 10-year contract was 0.015 points lower at 96.765.
New Zealand government bonds ease, prodding yields 2 basis points higher at the short end of the curve.
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