The Australian dollar rose to the strongest in 19 months versus the yen after Japan’s main opposition party reclaimed power in elections yesterday on pledges of increased fiscal and monetary stimulus.
New Zealand’s dollar touched a four-year high versus the Japanese currency on prospects the election will add to pressure on the Bank of Japan to expand easing as early as this week. The so-called Aussie slid against the U.S. dollar before the Reserve Bank of Australia releases minutes tomorrow from this month’s meeting when interest rates were reduced. Australian bond yields touched three-month highs.
“We had a very large lift in the dollar-yen and yen crosses after the election result,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia, the nation’s biggest lender. “The RBA minutes are likely to put a little bit of downward pressure on the Aussie because they’re likely to indicate the RBA is still open to further easing.”
The Australian dollar gained 0.5 percent to 88.67 yen as of 4:16 p.m. in Sydney from Dec. 14, after earlier touching 89.13, the highest since May 2, 2011. The Aussie fell 0.3 percent to $1.0540. The currency touched NZ$1.2455, the lowest since Oct. 9, before trading little changed at NZ$1.2489.
New Zealand’s dollar, known as the kiwi, reached 71.51 yen, the strongest since October 2008, before trading at 71, 0.5 percent above the close in New York. The currency slid 0.3 percent to 84.39 U.S. cents.
The yield on Australia’s 10-year government debt rose as much as four basis points to 3.41 percent, the highest since Sept. 17, before dropping to 3.34 percent.
In Japan, Shinzo Abe’s Liberal Democratic Party captured 294 seats in the 480-member lower house of parliament yesterday, while Prime Minister Yoshihiko Noda’s Democratic Party of Japan lost three-fourths of its lawmakers, according to public broadcaster NHK’s vote count. Abe has called for unlimited easing by the Bank of Japan. The BOJ next meets on Dec. 19-20.
“The new government aims to lift economic growth via further monetary stimulus, a move that has seen the yen decline and bond yields rise in recent weeks,” Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney, wrote in a report to clients today.
The New Zealand dollar was supported after a private report showed an improvement in consumer sentiment. Westpac Banking Corp. and McDermott Miller Ltd.’s gauge of confidence rose to 111.1 in the fourth quarter, the highest since the third quarter 2011.
The kiwi dollar has gained 6.3 percent in 2012, the best performer among the 10-developed-market currencies tracked by Bloomberg Correlation-Weighted Currency Index. The Aussie rose 0.6 percent in the same period.
The RBA will release tomorrow the minutes of the Dec. 4 meeting when it cut its benchmark rate by a quarter percentage point to 3 percent. Interest-rate swaps data compiled by Bloomberg show traders see a 56 percent chance the central bank will lower its benchmark to 2.75 percent in February.
The Reserve Bank will probably cut interest rates to 2 percent by the end of 2013, Australia & New Zealand Banking Group Ltd. said in a report today.
Futures traders increased bets to a record that the Australian dollar will gain against the greenback, figures from the Washington-based Commodity Futures Trading Commission showed Dec. 14. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop -- so-called net longs -- was 103,376 on Dec. 11, the most in data going back to 1993 and compared with net longs of 92,229 a week earlier.
“There’s still very strong demand for Aussie bonds from foreign central banks,” said Commonwealth Bank of Australia’s Capurso. “That’s why, when the Aussie does sell off, the selloff’s usually fairly shallow.”