Updating here that the currency pair, AUDJPY will still have legs to run,...
News: Aussie-yen set to extend rally

Growth bets overshadow the RBA’s attempt to rein in the Aussie dollar

Chief Investment Office, Newsfeed15 Feb 2021
Photo credit: AFP Photo

The Aussie dollar appears poised to extend its rally against the yen as bets on the global economic rebound overshadow the Reserve Bank of Australia’s (RBA) efforts to restrain the currency. The growth sensitive pair, which has surged 35% from a decade low in March, may test resistance around JPY84 per Australian dollar in coming weeks after recently breaching its April 2019 high.

Key technical indicators, including its moving average convergence/divergence, suggest upward momentum will continue, while hedge fund positioning also points to further gains.

The steady advance in commodity prices that underpins the growth outlook for the Aussie is coming just as vaccines start to find traction in the fight against the coronavirus, reducing the yen’s haven appeal.

Net long positions in the Australian dollar among leveraged funds rose to a three-month high in the week ended 9 February, while net long positions in the yen shrank to a three-month low.

The uptrend in Aussie-yen that was already clear by mid last year, accompanied by Japanese purchases of Australian bonds, would likely have been noticed by the RBA before it boosted monetary stimulus in November, according a head of FX strategy in London.

The central bank’s quantitative easing may help to limit upside for the currency pair, “though the better-than-expected recovery in the Australian labour market and stronger house price inflation should still lend support,” she said. This suggests “scope for further modest gains” in the coming weeks and months.

The release of Australia’s January jobs data on Thursday (18 February) provides investors with another opportunity to test this view, after the unemployment rate in December fell to an eight-month low. – Bloomberg News.

On Friday, the US Dollar Index added 0.07% to 90.480, the euro slipped 0.08% to USD1.2120, the pound rose 0.24% to USD1.3849, and the yen weakened 0.18% to 104.94 per dollar.