SYDNEY/WELLINGTON: The Australian dollar rose to its highest against the yen in 20 months on Friday as weak Japanese economic data only reinforced speculation the country's central bank will have to take bold measures to jumpstart the ailing economy. Still, the growth-linked Antipodean currencies were outpaced by the US dollar and euro as investors squared positions before the end of the year.
The Australian dollar climbed to 89.83 yen, its strongest since April 2011, showing gains of 2.2 percent for the week.
Charts suggest more upside with 5, 10- and 20-day moving averages pointing north. A break above 90.04 would take it to levels not seen in four years. The Aussie has gained 14 percent this year, the largest increase since 2009.
But for now, David Scutt, a trader at Arab Bank Australia, sees scope for a short-term correction.
"Positions are massively overbought... It's only a matter of time before we see a pullback," he said, seeing the Aussie dropping to around 88 yen before bouncing back.
The kiwi climbed to around 71.15 yen, approaching a four-year high around 71.40 yen hit last week. It is up 18 percent since January.
Investors have been selling yen heavily in expectation that Prime Minister Shinzo Abe will force the Bank of Japan into taking far more aggressive policy stimulus than in the past.
Data released earlier in the session, including persisting deflation and a larger-than-expected falling industrial output, only heighten speculation of more action from the country's new government.
"Desperate times call for desperate measures," said Arab Bank's Scutt, forecasting the Australian dollar to go above 100, in the longer-term, citing 104 as a possible level.
Against its US counterpart, the Aussie was pinned down near one-month lows at $1.0374, with markets cautious over the US fiscal situation.
The Aussie was well off a three-month high of $1.0585 early this month.
But losses were limited by a hefty rise in spot iron ore prices which have climbed to eight-month highs at $139.40 .
Prices are now up 61 percent from the lows hit in September, a boon to Australia's national income as the steel-making mineral is Australia's single largest export earner.
The kiwi slipped to $0.8206 and hovered near a one-month low of $0.8156 hit on Wednesday.
It has retreated from a 15-month high of $0.8477 hit last week. Market participants said any upside will be capped by offers suspected around $0.8250.
The kiwi has stumbled against the US currency in recent weeks, but overall, relatively higher yields of New Zealand assets have been a big draw for overseas investors in 2012.
This has boosted the domestic currency around 6.5 percent versus a currency basket this year, its best performance since 2009.
Traders were watching for any signs of progress on US fiscal discussions, adding that a lack of progress posed downside risks for the higher-yielding kiwi.
"If we don't see any resolution, there's a chance the kiwi will test the 200-day moving average at $0.8080," said a trader in Wellington.
He added that a comprehensive fiscal agreement would snap the kiwi's downward momentum, and that a run up towards $0.8400 would be possible.
The euro held recent gains against the Antipodean currencies. It last fetched A$1.2762 against the Aussie, having climbed a three-month peak of A$1.2807 on Thursday.
Against the kiwi, it edged up to NZ$1.6133, within sight of a six-month high of NZ$1.6220 hit on Wednesday.
New Zealand government bonds were flat pretty much across the curve.
Australian government bonds were a touch higher with the three-year contract steady at 97.270, while the 10-year contract added 0.025 points to 96.695. They plumbed four-month lows earlier this month.
Comments
Comments are closed for this article.