NEWS / Foreign Exchange

AUD weaker following PPI, Q1 CPI awaited

NZD recovers after NZD/JPY sell-off

The NZD slipped from an early high of 0.7485 during local trade yesterday, pressured by selling against a stronger Japanese yen. An upgrade of Japan??™s sovereign debt rating by S&P led to carry trade unwinding which pushed NZD/JPY lower from 88.70 to below 87.00. The NZD slipped to a low of 0.7429, but recovered in overnight trade after the OECD reported in its annual survey that serious imbalances in the economy were fuelling inflation and propping up the NZD. The currency opens this morning at 0.7450.

AUD weaker following PPI, Q1 CPI awaited

The AUD also weakened yesterday, following a weaker than expected PPI reading. Recent AUD strength was cited as the main reason behind the flat Q1 reading, significantly lower than market expectations of 0.6%. The currency softened from a high of 0.8380 during local trade and marked a low of 0.8319, with notable selling seen against the yen. The AUD opens this morning at 0.8325, with key Q1 CPI data scheduled for release today.

Yen yo-yo??™s in active trading

The main story yesterday was yen strength, particularly against the carry trade currencies. USD/JPY initially pushed higher during the Asian time zone with stops taken out as the pair moved through the 119.00 level, however it came under selling pressure after S&P raised its long-term sovereign rating on Japan to AA from AA-minus. This saw the currency pair drop to a low of 118.23 then bounce after Vice Finance Minister Fujii said Japan was not considering setting up an investment body for managing FX reserves ??“ contrary to a report in the Financial Times earlier in the day. It opens today around 118.65. The other majors were fairly quiet given that there was little event risk to dictate direction, with euro easing back from its highs after a bout of profit taking and GBP also falling against the USD to around 1.9970 before recovering to end the day just under 2.0000.

No significant data were released internationally last night.