Bloomberg News

Aussie Is Near 9-Month High Versus Yen Before Reserve Bank, U.S. Payrolls

March 04, 2012

Australia’s dollar was within 0.4 percent of a nine-month high against the yen before a central bank meeting tomorrow where policy makers are expected to keep the highest interest rates among major developed economies.

New Zealand’s dollar rose against most of its 16 major peers before U.S. data this week which economists expect to show services industries expanded and employers increased payrolls. Demand for the so-called kiwi was limited amid speculation recent gains have been excessive.

“There’s a good chance the RBA removes its conditional easing bias and moves to a neutral bias,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “Some of the mining-related data has been very, very strong and the downside risk to Europe has eased considerably as well. Aussie could get a bit of a kick along.”

Australia’s dollar fetched 87.71 yen as of 10:39 a.m. in Sydney from 87.80 on March 2, when it touched 88.01, the highest since May 11. The currency was little changed at $1.0737 from $1.0733 on March 2. New Zealand’s dollar was at 67.80 yen from 67.83, and bought 83 U.S. cents from 82.91.

RBA Meeting

RBA policy makers will keep the overnight cash rate target at 4.25 percent, according to all 24 economists surveyed by Bloomberg News.

Traders expect Australia’s central bank to reduce borrowing costs by 40 basis points within a year, according a Credit Suisse AG index based on swaps. That compares with 104 basis points in cuts predicted on Feb. 1.

In the U.S., the Institute for Supply Management’s non- manufacturing index probably fell to 56.2 last month from 56.8 in January, the highest since March 2011, according to economists surveyed by Bloomberg before the data today. A reading above 50 indicates expansion.

Payrolls probably increased by 210,000 last month after rising 243,000 in January, according to economists in a separate Bloomberg poll.

The payrolls number is “going to be a solid number,” CBA’s Capurso said. “That will probably be supportive of the Aussie.”

The kiwi-dollar’s 14-day relative strength index against the yen was at 73 on March 2, above the 70 level that some traders see as a sign that an asset may be about to reverse direction. The Aussie’s 14-day RSI against the yen was at 78.

The Aussie dollar “remains overvalued on the basis of fundamental relationships with Australia’s terms of trade and interest rates,” Mike Jones a foreign-exchange strategist at Bank of New Zealand in Wellington, wrote in a research note today. The Aussie’s “close below $1.0710 would pave the way for a move back to $1.06 and below. We still favor a gradual decline to $1.01 by year-end.”

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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