Australian Dollar Gains Versus Yen on BOJ Stimulus Bets

The Australian dollar rose versus the yen for a second day on speculation pressure will increase on the Bank of Japan (8301) to expand stimulus after core consumer prices in the nation declined last month.

The so-called kiwi dollar traded 0.3 percent from its highest level versus the yen since September 2008 after minutes of a BOJ policy meeting in December showed the central bank intends to continue powerful easing. The Australian currency reached a three-week low versus the U.S. dollar as traders remained almost split on whether the Reserve Bank of Australia will cut its benchmark interest rate on Feb. 5.

“We should see more yen weakness, and Aussie-yen as a consequence is beginning to perform quite well,” said Jim Vrondas, the chief currency and payments strategist, Asia- Pacific, at OzForex Ltd. in Sydney. “The market is quite confident that the new regime in Japan, for the time being at least, is going to deliver on what they’re saying in a somewhat aggressive way,” he said referring to Liberal Democratic Party’s return to power after elections last month.

Australia’s dollar rose 0.2 percent to 94.56 yen as of 4:42 p.m. in Sydney. It fell as low as $1.0439, the weakest since Jan. 4, before trading unchanged at $1.0451.

New Zealand’s dollar was little changed at 75.67 yen, after reaching 75.89 yesterday, its strongest since September 2008. It declined 0.2 percent to 83.63 U.S. cents.

The so-called Aussie may climb toward 100 yen and New Zealand’s dollar may advance to 80 yen over the first quarter, Vrondas said.

Japan Inflation

Japan’s consumer prices excluding fresh food fell 0.2 percent from a year earlier in December, the statistics bureau reported in Tokyo today. BOJ Governor Masaaki Shirakawa and his board doubled their inflation target to 2 percent on Jan. 22, announcing that the central bank will buy government bonds indefinitely to help achieve the goal.

The New Zealand dollar is poised for its fifth-straight weekly advance against the yen, gaining 0.3 percent since Jan. 18. The Aussie has slid 0.1 percent, halting four weeks of gains.

Demand for the Australian dollar was tempered as swaps traders bet on a 51 percent chance that the RBA will lower its benchmark to 2.75 percent on Feb. 5. A Credit Suisse Group AG index shows wagers on 51 basis points of cuts over the next 12 months, compared to 40 basis points on Jan. 18.

“The market is starting to price in more of a possibility of a rate cut,” said Vrondas. “There’s definitely some strong resistance at the $1.06 level.” Resistance refers to an area on a chart where analysts anticipate orders to sell may be clustered.

Yields on Australia’s 10-year bonds rose four basis points, or 0.04 percentage point, to 3.21 percent, the first increase in three days. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest- rate expectations, rose one basis points to 2.825 percent.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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