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Australian, NZ dollars at multi-month peak versus yen as yields climb

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The Australian dollar jumped on the Japanese yen on Friday as investors piled positions in high-yielding currencies with Aussie bond yields near 11-month highs, tracking US Treasuries.

[SYDNEY] The Australian dollar jumped on the Japanese yen on Friday as investors piled positions in high-yielding currencies with Aussie bond yields near 11-month highs, tracking US Treasuries.

The Australian dollar hit a seven month peak of 84.60 yen, clocking its fifth straight day of gains.

The Aussie rose 0.2 per cent against the greenback but was trapped in a US$0.7365-US$0.7446 band. It has gained more than 1 per cent on the week, holding its own against the US dollar. "Support for the currency appears to have been driven by another solid night for commodities," said Rodrigo Catril, currency strategist at National Australia Bank.

Prices of iron ore, the country's single biggest export earner, have rallied hard this week. Futures traded in China were up almost 6 per cent, having jumped over 7 per cent on Wednesday.

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Also helping was carry demand, where investors borrow at low rates in yen to buy higher yielding assets such as the Aussie and the New Zealand dollar.

Elsewhere, the Aussie hit a one-week high against the euro, rising for a fourth straight session.

It rose to a one-month high on the kiwi, climbing for a third straight day. It was last up 0.24 per cent at NZ$1.0602. "Traders will now be eyeing some important data from the US next week as the key determinant of whether or not this US dollar move - and consequently the pressure on the AUDUSD - is going to continue or lift," said Greg McKenna, chief market strategist ta AxiTrader.

Data out next week include US gross domestic product, consumer confidence and employment.

The New Zealand dollar touched a near 11-month peak against the yen.

Against the US dollar, the kiwi hovered around US$0.7000, up from a four-month low of US$0.6970 hit the previous day.

A resurgent US dollar has been driving the kiwi lower as the market continued to bet that Trump's administration will increase debt-funded spending and spur higher growth and inflation.

"While we expect NZD/USD to weaken through next year towards the US$0.67 mark, it would be remiss to ignore the fundamental factors that are still supportive for the NZD - an economy growing above trend and facing improving terms of trade," said Jason Wong, BNZ currency strategist, in a research note.

New Zealand government bonds gained slightly, sending yields 0.5 basis points lower at the long end of the curve.

Australian government bond futures skidded to multi-month lows. The three-year bond contract was at a seven-month trough, down 4 ticks at 98.03. The 10-year contract also slipped 4 ticks to 97.245, having touched its lowest level since early January.

REUTERS

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