AUDNZD Bounce Masks Underlying Yen Cross Volatility
The yen intervention by Japan has sent shockwaves through currency markets, causing the Australian and New Zealand dollars to hold multi-week highs against the US dollar.
AUD/USD hovered near $0.7024 after briefly hitting a six-week high around $0.7033, while NZD/USD sat near $0.5870 after touching a two-month top around $0.5882.
However, both currencies fell against the yen: AUD/JPY slid as much as 2.7% to 110.89 before rebounding, still well below a recent peak of 114.66.
The split between the two currency pairs matters because a softer US dollar can lift AUD/USD and NZD/USD, while a stronger yen can pressure 'yen crosses' if investors unwind carry trades funded in yen, basically, borrowing cheaply in yen to buy higher-yielding assets elsewhere.