The Australian and New Zealand dollars reached the highest levels in more than four years versus the yen amid speculation the Bank of Japan will expand monetary easing, boosting the allure of higher-yielding assets.
The so-called Aussie rose against most of its major peers as investors pared bets on interest-rate cuts by the Reserve Bank of Australia. The nation’s bonds dropped, sending the 10-year yield to the highest since May. The New Zealand dollar declined against the greenback amid concern a drought in the nation will hurt its economy. Haruhiko Kuroda, the nominee to become the Bank of Japan’s next governor, yesterday signaled readiness for a quick expansion in monetary stimulus.
“The suggestion that Kuroda may ease policy before the April 4 meeting has given the yen a push lower” against crosses including the Aussie and kiwi currencies, said Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada. “Expectations for rate cuts in Australia are falling, and as long as the data keeps printing OK, that’ll keep yields grinding higher.”
The Australian dollar rose 0.2 percent to 99.14 yen at 5 p.m. in Sydney, after earlier touching 99.58, the highest since August 2008. The currency was unchanged at $1.0281.
New Zealand’s dollar reached 79.90 yen, the highest since July 2008, before trading at 79.53, 0.3 percent below yesterday’s close. The so-called kiwi declined 0.4 percent to 82.47 U.S. cents.
Kuroda said yesterday that the bank would consider buying derivatives as part of its easing efforts. Kikuo Iwata, a nominee for deputy governor, said today in upper house confirmation hearings the central bank can end deflation solely through buying government debt. Japan’s central bank will next meet for two days ending April 4.
The fiscal policy council at the opposition Democratic Party of Japan will recommend approving Kuroda and rejecting Iwata, according to two officials who asked not to be named ahead of announcement.
Australia’s 10-year yield advanced as much as six basis points, or 0.06 percentage point, to reach 3.64 percent, the most since May 2. The three-year rate touched 3.03 percent, the highest since April 30. Yields on two-year notes climbed to 2.97 percent, a level unseen since Aug. 21.
National Australia Bank Ltd. said today its business confidence index for February fell to 1 from 3 in the month prior. The gauge, a measure of hiring, sales and profits, deteriorated to minus 3 from minus 2. Westpac Banking Corp. will release results of a consumer confidence survey tomorrow.
A gauge of home loans will probably show a rebound in January, according to the median economist estimate in a Bloomberg News survey before tomorrow’s announcement.
Interest-rate swaps data compiled by Bloomberg show traders see a 19 percent chance the RBA will cut its overnight cash-rate target to 2.75 percent when policy makers next meet on April 2. That’s down from 25 percent odds a week ago.
The Australian dollar has gained 2.6 percent in the past month, the biggest gainer after the greenback among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Index. New Zealand’s dollar has risen 0.8 percent in the same period.
The Aussie’s strength won’t change soon, according to Lyn Cobley, Treasurer at Commonwealth Bank of Australia, the nation’s biggest lender by market value. “The economy is adjusting to a stronger Australian dollar, and they will need to as it will continue.”
Australia & New Zealand Banking Group Ltd. is re-entering a bet the Aussie will rise versus its New Zealand counterpart, targeting NZ$1.2650, David Croy, Wellington-based head of markets research for New Zealand, wrote in a note to clients today.
“Australian data this week is likely to exhibit strength,” Croy wrote. “In New Zealand the risks look poised to the downside as the market focuses on the developing drought.”
Drought declarations were extended to most of New Zealand’s North Island last week, including the nation’s biggest milk-producing region. The dry conditions may reduce economic growth, Finance Minister Bill English said in parliament today.
The Aussie rose 0.4 percent to NZ$1.2465.
New Zealand’s two-year swap rate, a fixed payment made to receive a flowing rate, fell two basis points to 2.98 percent.
The Reserve Bank of New Zealand meets on March 14 and will probably keep rates steady at 2.5 percent, according to all 16 estimates in a Bloomberg survey of analysts.