Australian, New Zealand dollars rebound on yen as BOJ sticks to easy policy

THE Australian and New Zealand dollars rebounded against a retreating yen on Friday after the Bank of Japan (BOJ), headed at a policy meeting for the last time by outgoing Governor Haruhiko Kuroda, stuck to its super-easy economic stimulus.

The Aussie hit 89.99 yen after easing to its lowest in seven weeks at 89.22 yen earlier in the day amid bets of a surprise tweak to the BOJ’s bond yield curve control, which had sent US dollar/yen volatility gauges spiking.

The kiwi dollar jumped 0.5 per cent to 83.43 yen having also tumbled 1 per cent overnight to as far as 82.99.

The BOJ maintained ultra-low interest rates on Friday and held off making changes to its yield control policy, leaving options open ahead of a leadership transition in April.

The yen was last down about 0.3 per cent at 136.55 per US dollar after a knee-jerk plunge of as much as 0.62 per cent.

With all the action in the yen, the Aussie was 0.3 per cent lower against the US dollar at US$0.6574, its lowest since early November and on course for a weekly plunge of 2.9 per cent.

A break below US$0.6545 would be bearish and intensify a recent downward trend.

The kiwi dollar was flat at US$0.6099 versus its US counterpart, not too far away from a four-month low of US$0.6083 hit earlier this week. At present, it is down 2 per cent for the week.

Overnight, surprisingly high US jobless claims offered a weak prelude for broader non-farm payrolls data due later on Friday, putting some pressure on recent dollar gains.

SEE ALSO

Bank of Japan keeps ultra-low rates at Kuroda’s final policy meeting

Australia’s central bank says it is closer to pausing on rate hikes

The jobs figures are a crucial barometer of the health of the labour market and direction of interest rates after Federal Reserve Chair Jerome Powell earlier this week said the bank could raise rates further and faster if data showed such action was needed to manage inflation.

“A strong U.S. payroll report tonight risks pushing AUD/USD down towards 0.64,” said currency strategist Carol Kong at Commonwealth Bank of Australia.

“A payroll gain that is on or above consensus will likely cement market expectations for a 50bp increase later this month and push the USD up sharply.”

Australian government bonds had a stellar week after the Reserve Bank of Australia signalled a likely pause in rate increases next month.

Three-year yields fell 24 basis points this week to 3.354 per cent and 10-year yields plunged 28 bps to 3.629 per cent. REUTERS