A$ hits four-year high against Yen, four-month low against Greenback

Jon Condon, 07/02/2013


Source: XE.comThe A$ hit a four-month low against the US Greenback this morning – the same week that the currency reached a four-and-a-half year high against the Japanese Yen.

Earlier this morning the A$ reached a value of US103.17c, and traded below US103c overnight – the lowest level seen since mid-October last year. The adjustment providing some much-needed competitive relief for exporters, after a lengthy period where the currency value was close to, or above US105c.

The A$ has now fallen more than US1c in value from where it was trading before the Reserve Bank announced it was keeping the official interest rate on hold on Tuesday. Yesterday’s release of weaker-than-expected retail trade figures continued to weigh on the A$ overnight, analysts said.

Retail spending fell 0.2 per cent in December, Australian Bureau of Statistics data showed, a third consecutive month of falls, and against market expectations of a 0.3 percent rise.

Analyst Chris Tedder said the retail figures would put more pressure on the Reserve Bank of Australia to cut the cash rate at its March board meeting, after deciding not to cut rates at its Tuesday meeting this week.

“We still favour more downside for this currency pair in the lead up to next month's rate decision, especially after the weak retail sales data," Mr Tedder said.

Another local driver for the currency is expected to be official domestic employment figures for January, to be released later today. If the figures are weak it could further influence the RBA's March interest rate decision.

Japanese Yen surges

In stark contrast with currency trends against the US$, the A$ has surged to its highest level in four and a half years against the Japanese Yen. At close of business yesterday the A$ was worth 97.07 Yen.

Australian Meat Industry Council member Stephen Kelly, from Nippon Meat Packers Australia, said the Yen had also declined substantially against the US$, meaning imported meat, generally, in Japan would be more expensive.

“But given that Japan imports a lot of protein apart from beef, including chicken and pork, all imported meats – not just beef – will be affected, making them less affordable,” Mr Kelly said.

The recent changes in exchange rate were closely linked to the new Japanese Government’s decision to pursue a target of 2pc inflation, aimed at trying to lift Japan’s own export performance to stimulate the economy. Once that policy was announced by the Prime Minister in November, the yen started to appreciate considerably against both US and Australian currencies.

In mid-November, for example, the Yen was trading at around Y75 to the US$, but had since blown out to Y93.4 this morning. Similarly, the rise against the A$ had seen the currency rise from Y82.5 to Y97+ today.

While most of Australia’s beef trade into Japan is conducted in US$, relativities mean the impact is still the same.



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