Australian and New Zealand Dollar Advance, Yen Plummets Further

Obama’s expression of confidence on coming up with a possible solution on the upcoming fiscal cliff is not only helping the US economy, but the Australian Dollar has also seen a surge because of the same. Not only that, but, the Australian stocks have increased as well. The buoying demand for higher-yielding assets in the country has also seen a boost.

The Australian Dollar, more popular in the foreign exchange market by its abbreviation, AUD, soared higher than most of its major counterparts. However, its biggest gain was against Yen, the major currency of Japan. Yen, is already under pressure due to the political turmoil of the Asian country. Amidst such a situation, the Bank of Japan officials will sit to discuss the possibilities of more monetary stimulus.

The major currency of Australia’s neighbor New Zealand also advanced thanks to the positive data released for the service industry of the country. The New Zealand Dollar, fondly called Kiwi has shown growth as reports surfaced that the service industry has expanded in the fastest pace since 2007. The statistics was released by Bank of New Zealand and Business New Zealand. Performance of Services Index of New Zealand has jumped to 57.4 in October, 2012. This marks the highest value of this index since November, 2007. In September this year, the same was measured at 49.9. If the index is above 50, that denotes expansion for that particular industry.

Hideki Shibata, who is a Senior Strategist for Tokai Tokyo Research Center Co.’s rates and currencies department, stated that many investors are buying AUD and Kiwi as risk assets. According to him, this has resulted into stock movements as well. He added that as Yen is being sold-off broadly, investors are currently choosing both AUD and Kiwi as the high-yielding currencies.

AUD gained 0.3% against USD and is priced at $1.0369 per USD now. Against Yen, it has risen by 0.3% and 1 AUD is valued at 84.31 Yen. This is a level which has not been seen since 27th April of this year. The Kiwi, on the other hand, traded at 81.34 U.S. cents after experiencing growth of 0.4%. A Kiwi is now priced at 66.13 Yen. The MSCI Asia Pacific Index or MXAP also has seen a rise of 0.9%.

The yield on the benchmark 10-year bond has got up by 6 basis points, resulted due to the fall of Australian bonds. The yield is currently at 3.09%. On 15th November, incidentally, the yield was at a one-month low of 3.02%.

The future traders have started betting that AUD will increase further, according to the recent report released by Commodity Futures Trading Commission, the Washington based organization. The difference in the number of wagers by hedge funds and other large speculators on an advance in Australia is on the highest level since 25th September and it is at 68146 now. This is quite a bit more than last week’s value of 60317.

Japan, on the other hand, will probably move towards a strategy of aggressive monetary easing. The general elections in the country will be held on 16th December and according to exit polls, the opposition leader Shinzo Abe has the highest rating of the 2 major competitors. More than 37% of the Japanese citizen wants Abe as their next Prime Minister and Abe is undoubtedly a supporter of aggressive monetary easing. His recent demands of changes in the Japan’s economy are also suggestive of the same.