The major currencies of both the neighboring countries New Zealand and Australia has shown growth against USD today, thanks to the Bank of Japan’s announcement that it will be expanding the monetary stimulus. This decision of Bank of Japan has boosted prospects of overall growth throughout the globe.
The Central Bank of Japan announced that it will be setting an inflation target of 2% and will shift to the open ended asset purchases as done by the Federal Reserve. This marks the bank’s strongest commitment till date to put an end to the deflation of the country, going on for 2 decades. Incidentally, Japan is the second largest trading partner of Australia.
According to Derek Mumford, who works as the Director of Rochford Capital, the expansive monetary policy of Japan will bring lots of positivity in the markets and it is advantageous for global growth. He added that the situation is perfectly suitable for the Australian Dollar as the same looks forward to speed up growth and get inflation in Japan’s economy.
Australian Dollar jumped up by 0.4% on today and is currently at $1.0554. Each Australian Dollar currently costs 94.23 Yen, better than yesterday’s figure of 94.09 Yen per Australian Dollar. On the other hand, the New Zealand Dollar, also known as Kiwi, increased by 0.6% and each of the same costs 84.12 US cents now. Each Kiwi equals to 75.00 Yen currently, better than yesterday’s figure of 74.91 Yen.
Incidentally, Aussie (The popular nickname of the Australian Dollar) increased by 0.8% and Kiwi by 1% against Yen, immediately after the decision of Bank of Japan was announced. However, later on the day, both reversed. Incidentally, Aussie and Kiwi both have increased by 4% in 2012 against Yen, marking the biggest advances against Yen among all the major currencies.
The 10-year Australian bond yields were slightly changed and ended at 3.36% on today. The 2-year swap rate of New Zealand increased by 2 basis points and is at 2.83% currently. Incidentally, swap rate is a fixed payment which is made to receive to floating rates sensitive to the interest rate expectations.
Incidentally, the Reserve Bank of Australia officials will hold a meeting on 5th February and the swap traders are betting on a 45% chance that the benchmark borrowing costs will be lowered down to 2.75%.