BUZZ-COMMENT-AUD/JPY, NZD/JPY on the up-and-up, yield grab on

Nov 7 (Reuters) –
Expectations that the Reserve Bank of Australia could raise rates again on recently strong data and relatively wide Japan-New Zealand interest rate differentials have enticed fresh moves into JPY-funded carry trades. AUD/JPY and NZD/JPY, already at multi-month highs, could climb even further.

Japanese investor demand looks to have risen as the year-end approaches. With recent U.S. data suggesting the Federal Reserve may be done with hikes and rates falling sharply after the latest jobs report, the hunt for yield appears to have shifted, resulting in a fresh look at the JPY crosses.

AUD has always been a favourite destination of Japanese retail investors, and AUD/JPY has climbed back towards its 97.67 June 19 peak, trading as high as 97.51 Monday. A clean break of this level and 98.00 projects tests towards 98.43, a peak in September 2022 and highest since Dec 2014.

NZD/JPY too has rallied recently, trading from lows around 86.75 Oct 26-30 to 89.75 Monday. A clean break of the 89.83-93 Oct 10-12 triple-top, 90.00 and the 90.20 Sept 29 high projects a test towards the 91.07 May 2015 high if not the 94.05 high in December 2014.

Interest in NZD/JPY could remain high despite the Reserve Bank of New Zealand’s on-hold stance with the interest rate differential in two-year government bonds currently around 490 basis points. Though well off the 570 bps high on Oct 2, the spread remains the largest among developed economies.

Should USD/JPY continue to trade heavily alongside U.S. Treasury yields, interest in both AUD/JPY and NZD/JPY will likely persist.

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(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)

((haruya.ida@thomsonreuters.com;))