NZ dollar climbs to 3-month vs. yen as Japan faces structural economic imbalance

By Paul McBeth

Feb. 8 (BusinessDesk) – The New Zealand dollar climbed to a three-month high against the yen amid speculation Japan may be facing its first current account deficit since 1981, sapping investors’ appetite for the safe-haven asset.

The kiwi climbed as high as 64.41 yen, the highest level since Oct. 31, from 63.89 yen yesterday and traded at 64.38 yen at 5pm. The currency rose to 83.52 US cents from 83.33 cents yesterday.

Japan’s currency weakened 0.4 percent to 76.96 yen per US dollar after the nation’s current account surplus shrank 75 percent to a 15-year low 303.5 billion yen in December, stoking speculation the world’s third-biggest economy will record its first current account deficit since 1981. Last month Japanese government figures showed the first trade deficit since 1980.

“Japan has tried jawboning, they’ve tried to intervene, and now they’re pointing out the structural imbalance in the Japanese economy,” said Mike Jones, currency strategist at Bank of New Zealand. “The market was pretty happy to take the yen lower, which is consistent with the risk-on mood” and supported the kiwi’s strength, he said.

Upbeat optimism European policymakers will reach a deal to avert a Greek debt default added to the weight against the yen, as investors eschewed so-called safe-haven assets in search of fatter returns.

Traders will be watching tomorrow’s household labour force survey for direction on New Zealand’s jobs market, and economists are picking the unemployment rate will fall 0.1 percentage points to 6.5 percent. Still, the data series and “notoriously volatile” and a rogue number could create some excitement, Jones said.

BNZ economists predict the kiwi dollar will turn around from its recent five-month highs against the greenback, and is unlikely to test the 88 US cents figure it touched late last year.

Jones said there’s still momentum for the currency to push higher against the euro and the pound, and the European Central Bank and Bank of England meet to review monetary policy on Thursday in Europe.

The Bank of England is expected to resume its quantitative easing programme, while the ECB will likely reaffirm its easing bias, Jones said.

The kiwi fell to 63.07 euro cents from 63.89 cents yesterday, and increased to 52.86 pence from 52.72 pence.

It rose to 77.39 Australian cents from 77.26 cents yesterday, and was little changed at 73.12 on the trade-weighted index from 73.15.

(BusinessDesk)

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