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FOREX-Aussie, kiwi gain as rate hopes hot up

Published 12/10/2009, 02:18 AM
Updated 12/10/2009, 02:21 AM
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* Aussie up as jobs data supports rate hike expectations

* Kiwi also up after RBNZ signals rate increases

* Yen loses vs high yielders but holds ground vs GBP and euro

By Charlotte Cooper

TOKYO, Dec 10 (Reuters) - The Australian and New Zealand dollars gained on the dollar and yen on Thursday after Australian jobs data fuelled higher interest rate expectations and New Zealand signalled rates there may go up sooner than thought.

The Australian dollar bounced up 1 percent on the dollar and more than 1 percent on the yen after Australian employment beat forecasts in November and stoked expectations for an interest rate increase in February.

The kiwi also rose about 1 percent after the Reserve Bank of New Zealand (RBNZ), which held rates steady at 2.5 percent on Thursday, altered its tone and said it may begin removing policy stimulus by the middle of 2010.

Their climb aided the dollar, pound and euro versus the yen early, but investors then booked profits and pared riskier trades as Asian share markets had a mixed day, dealers and analysts said, making the gains short-lived.

"There is natural profit-taking which is a reason for their top-heaviness and heaviness in the yen crosses," said Masafumi Yamamoto, chief FX strategist Japan, at Barclays Capital in Tokyo.

"Investors are not taking positions for a long time ahead of the year-end and they are afraid of the liquidity."

The Aussie rose 0.5 percent to $0.9128. It was unable to pierce its 40-day moving average at $0.9188 which has underpinned it for much of this year but which it broke down through in November and again last week.

Against the yen it was up 0.4 percent at 80.15 yen, after climbing as high as 81.00 yen.

Australian employment surged past expectations and the jobless rate fell to 5.7 percent from 5.8 percent, a sign of strength that argued for higher interest rates next year.

The Reserve Bank of Australia next meets in February. It has raised rates for three months in a row, to 3.75 percent, and interbank futures fell as the market priced in a higher chance of another move.

"A hike in February looks more and more likely," said Brian Redican, a senior economist at Macquarie in Australia.

The RBNZ surprised markets by changing its rhetoric and backing off a previous pledge to hold rates steady until late 2010 and the kiwi rose 0.6 percent to $0.7240.

"This is a much bigger shift in RBNZ bias than we had expected," said Robert Rennie, chief currency strategist at Westpac, in the Reuters Dealing Room chatroom.

New Zealand bank bill prices fell as the market brought forward rate hike expectations, and the kiwi rose 0.5 percent to 63.51 yen, off the day's high at 64.03.

The dollar held steady at 87.81 yen after dropping 0.6 percent on Wednesday. Chartists expect support at 87.40/50 yen and resistance around 88.50.

CENTRAL BANKS AND JOBLESS CLAIMS

The euro hovered at 129.40 yen and was flat on the day at $1.4726.

It has been undercut by concerns about sovereign debt in the region, with Standard & Poor's cutting Spain's credit outlook to negative after Fitch downgraded Greece's credit rating.

"There are still a lot of sovereign rating type concerns and from the euro perspective that's going to keep the euro/dollar restrained in the short term," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

The dollar index was steady at 76.070, off a 1-month peak of 76.331 scaled in the previous session.

U.S. weekly jobless claims at 1330 GMT will be keenly watched for evidence supporting a better-than-expected monthly jobs report last week, which sent the dollar higher as investors began to bring forward their expectations for U.S. rate hikes.

Some of those expectations have subsided but one trader at a European bank said the jobs data had upset people's strategies for the coming year and the market would remain edgy until the next report, to see if it confirmed the improvement.

"Investors are on the sidelines but they are not that bearish. But a lot of people need a new strategy for next year," the trader said.

Economists forecast a total of 460,000 new filings in the weekly claims compared with 457,000 in the prior week.

Switzerland's central bank meets later, with no change in rates expected although it may renew its threat to fight unwanted franc strength.

The Bank of England also finishes a two-day policy meeting, with no change in rates or its quantitative easing programme expected.

Sterling fell 0.2 percent to $1.6244 and 0.1 percent to 142.63 yen. (Additional reporting by Kaori Kaneko in Tokyo and Anirban Nag in Sydney; Editing by Joseph Radford)

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