SYDNEY: The Australian and New Zealand dollars inched higher on Wednesday after cracking resistance offshore, while both held near nine-year peaks on the yen amid a spate of downbeat data on the Japanese economy.
The Aussie was a fraction firmer at $0.6554, having been as high as $0.6579 overnight after clearing the $0.6550 barrier. The kiwi dollar edged up to $0.6169, having climbed as far as $0.6191 on Tuesday.
Both were buoyed by gains on the yen as a string of soft data spurred wagers the Bank of Japan might stick with negative rates for a while longer.
The Aussie vaulted as high as 98.56 yen on dealing, pipping a top from 2022 to reach levels not seen since late 2014. The next major target is the 2014 peak of 102.40.
While markets assume the next move in Australian interest rates is down, a first move is considered unlikely until August or September.
Minutes of the Reserve Bank of Australia’s (RBA) last policy meeting out on Tuesday showed board members felt it would be “some time” before they could be confident inflation was receding as desired.
In the meantime, Australian three month rates pay 441 basis points to investors who borrow in yen to buy the Aussie.
Futures only have 40 basis points of Australian cuts priced in for all of 2024, and little more than 35 basis points of tightening in Japan.
Australian data on wages for the December quarter did little to change the outlook for rates with a rise of 0.9% exactly matching market forecasts.
Annual wage growth did pick up to a 15-year high of 4.2%, but analysts expect that to be the peak for this cycle given unemployment hit a two-year top in January.
“The bigger picture is that with the labour market now cooling in earnest, we think wage growth has now peaked,” said Abhijit Surya, an economist at Capital Economics.
“While wage growth won’t fall below 4% until the second half of the year, an improvement in productivity growth means that it should nonetheless be consistent with inflation returning to the RBA’s 2-3% target,” he added.
“The upshot is that we’re sticking with our view that the RBA is done hiking rates.”
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