The Aussie rose to its mid-August highs against the Japanese yen today as the traders listened to the analysts’ speculations that the central bank has opened a carry trade opportunity with the interest rate hike.
The Reserve Bank of Australia was the first one of the major global monetary policy institutions to raise the interest rate since the global financial crisis hit the world in September 2008. The central bank increased the target cash rate from 3.00 percent to 3.25 percent on October 6. This rate increment spurred the appreciation of the Australian dollar against the yen and the other low-yielding currencies.
While the Australian currency is heavily supported by its regulator’s relatively tight monetary policy, the Japanese yen can suffer greatly from the actions of the country’s financial authorities. The cheap yen is a crucial requirement for the growth of the export-aimed industrial economy of Japan. There are strong expectations of the currency interventions from the Bank of Japan in the near future. The Japanese yen is currently showing extremely high levels from the historical perspective against the dollar and the major currencies.
Analysts believe that by the end of this year there is a high probability to see two more rate hikes from Australia and a currency intervention from Japan. In this case the AUD/JPY rate may reach dramatic rates by January 2010.
AUD/JPY rose from 80.12 to 80.67 as of 7:53 GMT after reaching as high as 80.84 earlier today. It’s the highest level since August 13th. AUD/USD went down from 0.9067 to 0.9042 today, while AUD/NZD advanced from 1.2206 to 1.2227.
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