The Australian dollar suffered minor losses on Thursday. More importantly, the Australian and New Zealand dollars flopped around five-month highs, pausing after a dramatic, week-long rally driven by surging bond yields as well as expectations for a protracted boom in commodity prices.
The Australian dollar jumped to its highest point against the Japanese yen in several years. Against the U.S. currency, the Australian dollar was quoted at $0.7493. The Aussie was close to a previous session high of $0.7507, its best result since November.
The New Zealand dollar was in a narrower range with a high of $0.6977, just off Wednesday’s highest in four months at $0.6988 after jumping 1.3% overnight to surpass its 2022 top of $0.6926. As a result, the gains saw the kiwi breach a 200-day moving average at $0.6913. The kiwi has the chance to reach the next char target at $0.7080.
New Zealand and Australian dollars have been helped by hefty buying against the low-yielding yen, with the Aussie jumping 2.8% overnight. It reached its highest level since late 2015 at 90.89 yen.
Australian dollar and sanctions
The gains came as market price in the risk of an extended conflict in Ukraine and sanctions against Russia. The U.S. and its allies imposed unprecedented financial penalties on the country over its invasion of Ukraine. Many companies left or suspended operations in the country.
That is a windfall for Australian export earnings, but a major issue for Japan. The country is a net importer of resources.
While Japan is holding its yields around zero, Australian 10-year yields jumped nearly 60 basis points so far in March. Australian 10-year yields reached their highest since late 2018 at 2.82% on Wednesday but were a tad lower at 2.72% on Thursday.