(Bloomberg) — The Aussie dollar appears poised to extend gains against the yen as expectations of faster economic recovery gain traction and fears around the omicron variant ease.
The Aussie, which advanced 3% last week to over 81 yen, is seen extending gains to 83 by the end of March, according to a Bloomberg survey of currency analysts. The pair declined by about 6% in November as growing worries over the impact of the omicron roiled global markets.
“As long as the news about omicron isn’t bad we expect Aussie-yen to resume its uptrend,” said Kim Mundy, currency strategist and international economist at Commonwealth Bank of Australia in Sydney. “The global economic recovery is both supportive for the Australian dollar and a headwind to the yen.”
The currencies are likely to see their fortunes diverge in coming weeks as bets of a faster economic recovery in Australia stoke wagers for policy normalization, which may boost the local dollar. On the other hand, optimism about the global economic recovery may impinge on the haven yen, as would expectations that the Bank of Japan will maintain its dovish policy for longer.
Technical Trends
Technicals are also signaling that the worst may be over for the Aussie versus its Japanese peer. The pair bounced off support at its September low, never threatening levels seen in October — a bullish sign. Slow stochastics — a momentum indicator — have pulled back from oversold territory.
The Aussie may also get a boost from Thursday’s employment data and major trading partner China’s pledge to take measures to support its economic growth. A strong print would vindicate the Reserve Bank of Australia’s upbeat economic outlook last week, when it said omicron wasn’t expected to derail the recovery, and predicted the economy to return to its pre-delta path in the first half of 2022.
Employment in November is predicted to have risen by 200,000 jobs with the country’s unemployment rate falling to 5.0% from 5.2% previously.
“With the Australian economy likely to be on a strong enough footing to keep markets pricing in substantial RBA rate hike risks for 2022,” any dip in the Aussie would be seen as a buying opportunity into the new year, said Sean Callow, senior currency strategist, at Westpac Banking Corp.
Here are the key Asian economic data due this week:
- Monday, Dec. 13: Japan 4Q Tankan survey, New Zealand house sales, India CPI
- Tuesday, Dec. 14: Australia business confidence
- Wednesday, Dec. 15: China retail sales, industrial production and fixed assets ex-rural, Australia consumer confidence, New Zealand 3Q BoP current account balance, Indonesian trade balance, India trade balance
- Thursday, Dec. 16: Australia employment change and RBA’s Lowe and Kearns speak, New Zealand 3Q GDP, Japan PMI’s and trade balance, Taiwan central bank policy decision, Bank Indonesia rate decision, Philippine central bank policy decision
- Friday, Dec. 17: BOJ policy decision, New Zealand business and consumer confidence, Singapore non-oil domestic exports
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