Forex News

Aussie & NZ dlrs climb on yen, firm on USD

20 March, 2012 - Reuters
  • Kiwi, Aussie up more than 12 pct this year vs yen
  • AUD near 10-day highs on USD
  • AUD bond futures hover near Nov lows

By Naomi Tajitsu and Cecile Lefort

WELLINGTON/SYDNEY, March 19 (Reuters) - The Australian and New Zealand dollars flexed their muscles on a timorous yen on Monday, building on a bull trend that has delivered double-digit gains so far this year.

The New Zealand dollar rallied as high as 69.12 yen, its strongest in nearly two years. Resistance was seen at 69.72 yen, a high previously hit in October 2009.

The kiwi has gained 15 percent on the yen this year, benefiting from a pick-up in risk demand and the view that New Zealand interest rates, currently at 2.5 percent, will rise a lot earlier than those in Japan.

Offering support was data showing an improvement in New Zealand consumer confidence and the country's services sector.

Investors brushed off a poll showing analysts had scaled back their economic growth expectations over the next 12 months.

The Aussie followed suit, holding near 10-month highs at 88.47 yen, with a break of the 88.00 barrier setting up a test of the 2011 peaks near 90.00. It has gained more than 12 percent since January 1.

The yen has been under pressure following last month's surprise easing by the Bank of Japan, which made the yen the funding currency of choice for carry trades.

A recent surge in U.S. Treasury yields has added to the downward pressure on the yen as the greenback is now less appealing for carries.

"We did see a massive move on the IMM yen net short positions," said a trader at a European Bank. She forecasts the Aussie to reach 90 yen in the medium-term.

Data from the U.S. Commodity Futures Trading Commission showed currency speculators have increased bets against the yen to their highest in nearly a year.

Against the U.S. dollar, the Antipodeans held firm, aided by solid Asian bourses.

The Australian dollar showed little reaction to a speech by Reserve Bank of Australia Governor Stevens who said the economy was not doing too badly.

He cautioned that Europe's debt problems were still a risk to the global economy, but remained upbeat on the outlook for China and the rest of Asia.

China is Australia's top export market.

The Aussie edged up to $1.0608, from $1.0580 late in New York on Friday. It touched a 10-day high of $1.0616 after stops above $1.0600 were tripped. Resistance was found at $1.0640, the 20-day MA, with support at $1.0550.

The New Zealand currency rose 0.2 percent to $0.8262, but remained short of recent six-month highs at $0.8471. It edged up against the Aussie, which slipped 0.1 percent to NZ$1.0602. Against a currency basket, the kiwi rose as high as 73.70, its strongest since March 2.

Many analysts expect the kiwi to stay strong in the coming weeks, although some saw potential downward risks ahead of a readings of New Zealand's economic growth and current account due later this week.

"Any increase in deficit to GDP ratio north of 4 percent will be negative for NZD," ANZ analysts said in a note.

"We also see small downside risks to the consensus 0.6 percent pick for GDP, which would also help cap NZD," they said, adding that they expected the kiwi to trade with a negative bias this week if it falls below $0.8250.

A shift away from safe havens saw U.S. Treasury yields spike higher last week, knocking Australian bond futures to their lowest in four months.

The Australian three-year bond contract eased 0.030 points to 96.180 , having troughed at 96.150 its lowest since November. The 10-year contract fell 0.040 points to 95.670, within easy reach of Nov. 9 lows.

New Zealand government bonds also retreated, pushing yields up 6 basis point at the long end of the curve.

(Australia and New Zealand bureaux)

Copyright Thomson Reuters 2012. All rights reserved.

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