AUD flying against the Yen, stable against the USD

15.18 AEDT, Monday 8 April 2013

AUD flying against the Yen, stable against the USD

By Tim Waterer (Senior Trader, CMC Markets)

The Australian Dollar did not fare that great in response to the softer US Non-Farm Payrolls, with the currency losing ground against the greenback as part of a ‘risk off’ move. The questions posed over US economic health created a strain not only on equities but also on the higher yielding Aussie which fell by the wayside in some respects as the Euro moved higher against the USD. I think the initial downward move in the AUD may have been a little overdone and I expect we could see it make up some lost ground in the next few trading sessions.

However, there are two key economic events this week which pose potential downside risk to the AUD, with Chinese Trade Balance data (Wednesday) and Australian employment numbers (Thursday) both possible of producing results not conducive to AUD buying should the numbers disappoint. But overall today the AUD was just drifting around mildly ahead of the key data releases due over the coming days, with the AUDUSD rate taking a back seat to events among the Yen cross rates.

While the AUD has fallen back against the US Dollar, gains continue to be made against the Yen with the AUDJPY cross rate trading above the 102 level. Although having said that, there are very few (if any currencies) that are not doing well against the Yen in light of the easing measures in the pipeline with the BOJ looking at imminent bond purchases.

Market expectations were pretty high going into Kuroda’s first BOJ meeting as Governor. For the Governor to still catch traders off guard with what could be described as a ‘line in the sand’ approach is really saying something. Financial markets seem convinced that Kuroda is indeed a man on a mission perhaps best evidenced by the extreme divergence between the Yen and the Nikkei since late last week.

Again across Asian markets today there was the Nikkei and then there was everyone else, with markets in the latter category showing discretion amid the latest unconvincing US jobs report as well as bird flu and North Korean concerns. While there were gains on other Asian bourses, the performances were dwarfed by the moves higher in the Japanese market.

Australian shares managed to advance despite the weaker Wall Street lead, however gains were tempered by the downturn among Shanghai stocks. The shift higher in the gold price after Friday’s US payrolls result seemed to spur the local resource stocks, with the Materials sector being one of the standouts today. However the buying witnessed today was far from rampant with traders aware that potential near time obstacles lie in wait, not the least of which being the upcoming US earnings season.
ends

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