Australian, New Zealand dollars rise on yen outflows, weak greenback

SYDNEY: The Australian and New Zealand dollars held onto gains on Tuesday, supported by flows out of the Japanese yen and broad weakness in the greenback on concerns over the US central bank’s independence.

The Aussie was buoyant at $0.6712, having gained 0.4% overnight to trade back above the key 67-cent level.

It is not far from a 15-month peak of $0.6766 with support around $0.6660.

The kiwi was well bid at $0.5776 after rallying 0.7% overnight, pulling away from a one-month low of $0.5712, though it remains some distance from a recent three-month high of $0.5853.

Investors sold the US dollar and bought gold after the Trump administration opened a criminal investigation into Federal Reserve Chair Jerome Powell over comments to Congress about a building renovation project, fuelling concerns about the independence of the Fed.

“The relative performance in the USD and gold is likely a reflection of a shift in investor preference of safe havens,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia.

“Continued challenges to undermine the independence of the Fed could further weaken the USD’s safe-haven appeal, limiting its ability to lift in times of uncertainty.”

Flows out of the Japanese yen also helped the two Antipodeans, on speculation that Prime Minister Sanae Takaichi may call a snap election as early as February, opening the door to more aggressive fiscal stimulus.

The yen hit a one-year low of 158.48 per dollar as concerns over possible intervention by Japanese authorities grew.

It also weakened across a range of crosses, with the Aussie hitting an 18-month high of 106.4 yen and the kiwi touching a 14-month top of 91.51 yen.

In Australia, a survey from Westpac showed that consumer sentiment slipped in January as households wrestled with renewed rate jitters and an uncertain economic outlook.

Markets imply around a 30% chance the Reserve Bank of Australia could hike its 3.6% cash rate a quarter point on February 3, rising to an 80% probability by May.

Across the Tasman Sea, the Reserve Bank of New Zealand announced two external members to its new financial policy committee, which will make key policy decisions relating to financial stability.