NZ dollar surges vs yen on Bank of Japan intervention

NZ dollar surges vs yen on Bank of Japan intervention, drops against greenback

By Paul McBeth

Oct. 31 (BusinessDesk) – The New Zealand dollar surged as much as 3.8 percent against the yen after the Bank of Japan made its third bid to devalue its currency this year.

The kiwi dollar rose to 64.10 Japanese yen from 62.15 yen immediately before the intervention, the same level it was at on Friday in New York. It fell to 80.98 US cents at 5pm from 82.22 cents at 8am, and was down from 81.93 cents on Friday.

Japan’s central bank stepped into currency markets after the yen hit a fresh post-World War II record 75.35 per US dollar, just two months after its biggest intervention in seven years. Japan’s Finance Minister Jun Azumi told reporters he’ll continue to intervene until he’s satisfied, and traders are speculating that’s at around 80 yen per US dollar. The greenback’s strength against the yen fed into other cross-rates, with the trans-Tasman currencies falling against the US dollar.

The market will “respect the Bank of Japan’s moves today, but if we don’t see the current level being softened by a further follow up, you’ll start to see the yen continue to strengthen,” said Khoon Goh, head of market economics and strategy at ANZ New Zealand. That would also take the kiwi “back to where it was before” the intervention, he said.

The Japanese intervention comes ahead of tomorrow’s Reserve Bank of Australia meeting which is expected to see the central bank cut the benchmark rate 25 basis points to 4.5 percent. That would trim some demand for the Australian dollar, though analysts will be looking to see whether Governor Glenn Stevens is keen to keep cutting.

New Zealand’s Reserve Bank kept the official cash rate on hold at 2.5 percent last week, with Governor Alan Bollard a bit more upbeat than the market was expecting, by keeping a bias towards higher rates next year.

The first tranche of local third-quarter employment comes out tomorrow, with total filled jobs expected to have dropped 0.6 percent in the three months ended Sept. 30, while the labour cost index is forecast to have grown 0.6 percent in the period, according to a Reuters survey.

The kiwi may trade between 80.68 US cents and 83.31 cents this week according to a BusinessDesk survey of six analysts. They forecast a range of between 76 Australian cents and 78 cents.

The kiwi rose to 76.88 Australian cents from 76.68 cents on Friday. It slipped to 57.73 euro cents from 57.82 cents on Friday, and declined to 50.70 British pence from 50.95 pence on Friday.

The trade-weighted index was little changed at 70.44 from 70.36.

(BusinessDesk)

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