SYDNEY/WELLINGTON: The Australian and New Zealand dollars soared to multi-month highs against a broadly weaker yen on Wednesday, buoyed by a revival in carry trades and risk appetite.
The Aussie tore to a 2.5-year high of 88.68 yen as investors sought higher-yielding assets using the Japanese unit as a funding currency.
The Australian dollar, at 88.33 yen in late local trading and up 0.7 percent on the day, has seen a huge turnaround from a trough near 75 yen plumbed on March 17, before the G7 intervened to curb yen strength.
Traders said the cross is heading towards highs last seen in September 2008 at 89.35, and possibly even 95 to 100 yen, as carry trades are coming back with a vengeance.
"It's basically driven by markets pushing back into risky assets and supported by confidence in central banks' easing," said Greg Gibbs, strategist at Royal Bank of Scotland.
The yen slid across the board with the kiwi, euro and sterling all hitting an 11-month peak. The New Zealand dollar climbed to a session high of 65.88 yen, up nearly one percent on the day, a long way from a trough of 55 just three weeks ago.
The rush into Aussie/yen in turn dragged the local dollar up on its US counterpart to around $1.0370, from $1.0327 in New York.
The Bank of Japan is not only expected to keep monetary policy on hold on Thursday but to also signal a readiness to ease policy further as damage from last month's devastating earthquake threatens to push the economy into recession.
The Australian dollar has gained 6 percent since mid-March, scaling new 29-year peaks over the past few sessions. Support is from $1.0315 and resistance at around $1.0422, then $1.0500.
The NZ dollar also inched up to $0.7718, a whisker away from a two-month high of $0.7727 struck earlier.
"It has been caught up in the general rush that has sent the yen lower and the Aussie and euro higher, but will probably need the euro to break higher to advance much more," said a dealer at a local investment bank.
Support is now seen at $0.7645, and resistance around $0.7721.
The kiwi managed to brush aside a fall in dairy prices in Fonterra's fortnightly auction. The 2.4 percent decline was the second fall in a row, suggesting prices may be levelling out after a stellar run higher.
The Aussie lost steam against its neighbour and fell below major support at NZ$1.3440 in offshore trade. It recovered at NZ$1.3417, well away from a 19-year high of NZ$1.3794 struck on March 7.
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