The Japanese currency rose, not just as a traditional destination for safe-haven seekers but potentially as Japanese companies and investors may be selling foreign investments and repatriating profits as the end of the nation’s fiscal year is at hand. The dollar pared losses to ¥82.45 compared with ¥82.78 late Wednesday. The euro followed suit, dropping to ¥109.36 from ¥110.43.
Risk aversion continues to be the main theme in the foreign-exchange market towards the yen. Trading in the currency may also be swayed by discussions of raising the country’s sales tax to cut its deficit, though such a move risks slowing consumption and the economic recovery. Exporters need the yen to trade higher than 82.00¥ to be profitable.
The Australian dollar recovered after hitting a 10-week low overnight. Friday, the Australian dollar was trading at 1.0403, up from 1.0363. The Aussie dropped to 103.05 US cents overnight amid a string of negative news but recovered somewhat on Friday morning. Weaker economic growth forecast from Portugal and large-scale protests in Spain had set the tone for markets overnight.
Unfortunately, with the Aussie dollar at the moment, every rebound is becoming shallower and shallower. That’s the definition of a downward trend, lower lows and lower highs.
The release of Chinese manufacturing data over the weekend could see the Australian dollar slump further next week, particularly if the data is worse than expected. The key level is 103.03 US cents. Any break below there and you start making the possible argument for parity.
The kiwi is exchanging at 0.8204 as it continues to build momentum as the week, month and quarter come to an end shortly. The New Zealand dollar has held near a six-month high against the Australian dollar on speculation the nation’s biggest export markets, China and Australia, will ease monetary policy.
Speculation is growing that China will trim the ratio of cash that its lenders must keep in reserve to encourage credit growth, amid signs the world’s fastest-growing major economy is losing steam. The RBA is expected to slash its cash rate by 73 basis points over the next 12 months, according to the Overnight Index Swap curve, narrowing the gap with New Zealand’s record low official cash rate of 2.5 per cent. New Zealand’s central bank is seen lifting the OCR by 26 basis points in the next 12 months.