3 weeks ago
Aussie-Yen Set to Approach Three-Decade High, Analysts Say
An exchange rate is like a price tag for money, telling you how much of one country's money you can buy with another country's money.
Lately, the Australian dollar has been getting stronger compared with Japan's yen.
Japan tried to help its own money by stepping in to buy yen, but experts say that help is already starting to wear off.
Many money experts think the Australian dollar will keep climbing, possibly reaching a record high not seen in decades.
One big reason is that Australia's central bank, the Reserve Bank of Australia, is keeping interest rates high, which makes the Aussie dollar attractive to investors.
Traders are now watching a meeting on August 11 where the bank is expected to keep rates unchanged, though there is about a 50% chance of another increase by the end of the year.
Not everyone agrees with the optimistic view.
One big Australian bank thinks the currency will actually fall back to around 108 yen by the end of this quarter.
Where the price goes next depends on the central bank's decisions and what other countries do with their money.
Analysts expect the Australian dollar to climb back toward a 35-year high against the yen as the impact of Tokyo's currency intervention fades.
The Aussie-yen pair dropped more than 4% toward the 109 level after Japanese intervention, then closed around 111.52 last week.
The Reserve Bank of Australia is widely expected to keep rates on hold at its Aug. 11 decision, with swap markets pricing roughly a 50% chance of another hike by year-end.
RBA Governor Michele Bullock affirmed policymakers won't hesitate to deliver additional rate hikes if needed.
Commonwealth Bank of Australia strategist Samara Hammoud counters that the pair has limited room to run, forecasting a slide toward 108 by the end of the quarter.
- Who
- The Reserve Bank of Australia and Governor Michele Bullock, Japanese authorities, and FX strategists at ANZ, AT Global Markets, Commonwealth Bank of Australia and Crédit Agricole.
- What
- The Australian dollar is expected to recover toward a 35-year high against the yen as the effects of Japanese currency intervention fade.
- Where
- Global foreign exchange markets, with analysts based in Australia and Japan.
- When
- Last week the pair closed around 111.52; the RBA policy decision is scheduled for Aug. 11.
- Why
- The RBA's hawkish stance and higher Australian interest rates are seen as outweighing Japan's market intervention, which analysts view as only temporary relief for the yen.
Analysts Expect Recovery
Analysts Expect Pullback
Aussie-Yen Outlook
Analysts Expect Recovery
ANZ, AT Global Markets and Crédit Agricole strategists expect the pair to recover toward its late-July levels and multi-decade highs as Japanese intervention effects fade, targeting 113.38 then 114.80.
Analysts Expect Pullback
Commonwealth Bank of Australia's Samara Hammoud says the pair has limited room to run once the recent dip unwinds, forecasting a slide toward 108 by the end of the quarter on US dollar strength.
RBA Policy Path
Analysts Expect Recovery
RBA Governor Michele Bullock says policymakers won't hesitate to deliver more rate hikes if needed, and swaps price roughly a 50% chance of a hike by year-end.
Analysts Expect Pullback
CBA expects the RBA to hold rates steady for the remainder of the year before initiating rate cuts.
Key facts
- Currency pair
- AUD/JPY (Aussie-yen)
- Recent close
- Approximately 111.52
- Post-intervention drop
- More than 4%, toward the 109 level
- Next RBA decision
- Aug. 11
- Market expectations
- Rates on hold, with roughly 50% odds of a quarter-point hike by year-end
- Analyst upside targets
- 113.38 initial target; resistance near the annual high at 114.80
- CBA forecast
- Slide toward 108 by the end of the quarter
- Further intervention
- Seen as unlikely given US signaling on potential coordinated action
Quotes
Michele Bullock
Governor of the Reserve Bank of Australia
“The initial target will be 113.38, the July 29 low, with stronger resistance up near the annual high at 114.80, pointing to rate spreads as a key driver behind the currency pair’s prior rally toward 115.”
livemint.com
“Policymakers won’t hesitate to deliver additional rate hikes if needed.”
livemint.com
Mahjabeen Zaman
Head of FX research at ANZ Group Holdings Ltd. in Sydney
“Much of the shift on the yen leg is done. Further Japanese intervention is unlikely given clear signaling from the US on potential coordinated action.”
livemint.com
Sources
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