The Australia dollar otherwise known as the Aussie held gains against the USD after reaching the top in a week after RBA Governor Stevens related in his presentation today that China will “grow pretty strongly.”
The kiwi reached a nearly 2 year high vs. the yen after reports signaled improvement in New Zealand’s services industry and purchaser confidence.
Requirement for both South Pacific currencies was supported as Asian stocks rose. The AUD roared to life today particularly against the JPY, building on a bull trend which has delivered double-digit gains so far this year. The greenback held near 10-month highs at 88.47 yen, with a break of the 88.00 barrier setting up a test of the 2011 tops near 90.00. It has gained more than 12 % since Jan first.
The yen has been under stress following last month’s surprise easing by the Bank of Japan, which made the yen the funding currency of choice for carry trades.
A surge in US Treasury yields has added to the downward strain on the yen as the dollar is now less appealing for carries. Against the USD, the Aussie held firm at about $US1.06, helped by solid Asian bourses. The pair touched a 10-day high of $US1.0616 after stops above $US1.0600 were tripped.
The Australian dollar showed small reaction to a speech by Reserve Bank of Australia governor Stevens who said the “economy wasn’t doing too badly”.
He warned that Europe’s debt issues were still a risk to the world economy, but stayed optimistic on the prospects for China and the remainder of Far East. China is Australia’s top export market. Stevens’s speech was in depth and intuitive, one of his best presentations to date.
[quote]The complete range of policies macroeconomic and structural need to play their part in looking for that improvement. So for everyone, the problems are those of modification to changing circumstances and fresh opportunities. An engaging journey lies ahead. So for all of us, the challenges are those of adaptation to changing circumstances and new opportunities. A fascinating journey lies ahead. We in Australia will be facing our own adjustment imperative. We will also be taking more than a casual interest in developments in the region in this ‘Asian century’.[/quote]
“China will have cycles like other economies, it appears likely the Chinese economy will grow pretty strongly roughly for a bit yet,” the Reserve Bank of Australia’s Stevens expounded at a Credit Suisse Group AG meeting in Hong Kong today.
The RBA held the overnight money rate at 4.25 % two weeks ago as policy makers “judged the setting of financial policy stayed acceptable for the moment,” Stevens claimed in an announcement after the decision.
