Antipodean Currencies Catch Wave from Japan's Forex Splash

The Australian and New Zealand dollars experienced a significant boost on Friday after Japanese intervention in the foreign exchange market, pushing their values to multi-week highs. The Bank of Japan held interest rates steady but reiterated its commitment to further hikes to stabilize inflation around 2%. In contrast, markets have largely priced out any chance of a near-term rate hike from the Reserve Bank of Australia (RBA) following this week's benign inflation report.

The Aussie dollar climbed 1.1% overnight to reach a six-week high of $0.7033, breaking above the $0.7026 resistance level and opening the way for further gains up to $0.7088. The kiwi dollar also jumped 1.5% to a two-month top of $0.5882, with its break above $0.5873 potentially targeting the May high of $0.5993.

However, both currencies lost ground to the yen, with the Aussie falling as much as 2.7% at one stage before partly rebounding. The Bank of Japan's decision was seen as a significant factor in the move, although Westpac, Goldman Sachs, and Capital Economics all dropped their calls for an RBA rate hike following this week's inflation data.

Paul Bloxham, head of Australian economics at HSBC, stated that the slowdown in economic growth and cooling housing market would be enough to convince the RBA not to hike further, but noted that a prolonged period of sluggish growth would be required for inflation to fall back to target.