Australian and NZ dollars rise against the yen but fall against the dollar

July 16, 2024

Key points

• The Australian dollar strengthened 0.2% to 106.98 yen, rebounding for the first time in four sessions.
• The New Zealand dollar also rose 0.2% to 96.11 yen after four sessions of declines.

The Australian dollar climbed 0.2% to 106.98 yen, marking a rebound after four consecutive sessions of declines. This recovery came after suspected intervention from Tokyo last week, which disrupted the popular carry trade, where investors borrow in a low-interest currency like the yen to invest in higher-yielding assets. The intervention saw the Aussie retreat from a 33-year high of 109.67 yen reached last Thursday.

Picture: Aussie rises against the yen as seen on the VT Markets app.

Kiwi rebounds against yen

Similarly, the New Zealand dollar resumed its upward movement, gaining 0.2% to 96.11 yen after a period of weakness. This movement indicates a renewed interest in the kiwi as traders adjusted their positions.

Australian and New Zealand dollars weaken against U.S. dollar

However, against the US dollar, both the Australian and New Zealand dollars continued to weaken. The Aussie slipped 0.3% to $0.6739, extending a 0.4% drop from the previous night. This decline follows a retreat from a six-month peak of $0.6798 reached last week.

The New Zealand dollar fell 0.4% to $0.6050, after a 0.7% drop overnight breached a critical support level of the 200-day moving average of $0.6077. It remains to be seen if the $0.6048 level can hold, which would be crucial for the kiwi’s short-term outlook.

Also read: Aussie hits six-month high, kiwi drops on U.S. rate cut speculation

US dollar gains in Asia despite weak yen

In Asia, the US dollar was 0.12% firmer, supported by renewed weakness in the Japanese yen. This strength came despite dovish comments from the Federal Reserve, which fuelled expectations of more rate cuts this year. The greenback also gained from the so-called Trump-victory trades, with long-term Treasury yields moving higher.

Investors are now awaiting critical economic data from both countries. New Zealand’s CPI report is due on Wednesday, and Australia’s jobs data will be released on Thursday. These reports are expected to influence the immediate interest rate outlook for both nations.

Swaps imply two rate cuts from the RBNZ this year, while there is a 12% probability that the RBA will deliver a hike in August. This dovish shift in pricing for the Fed and the contrasting expectations for the RBA and RBNZ will likely continue to drive market movements in the near term.

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