By Candice Zachariahs
Feb. 11 (Bloomberg) -- The Australian dollar should “benefit most” as the yen is set to weaken and China’s economy may be heading for an early rebound, BNP Paribas SA said.
Japan’s economy may have shrunk 12 percent in the fourth quarter, France’s largest bank said yesterday in a note to clients. China’s money supply grew 18.4 percent in January, according to a Bloomberg News survey of economists, aiding government efforts to boost growth.
“The trigger of the anticipated yen decline may well be related to Japan being at risk of moving into a depression,” foreign-exchange analysts led by London-based Hans-Guenter Redeker wrote in a report. “If we are correct in our interpretation concerning Japan and China, the Australian dollar should benefit most.”
Australia’s currency fell 1.5 percent to 65.82 U.S. cents as of 11:35 a.m. in Sydney from 66.85 cents late in Asia yesterday. It has slumped 5 percent this year.
The Australian dollar dropped 21 percent in 2008 as commodity prices fell and investors unwound so-called carry trades, where borrowings in low-cost countries such as Japan are invested in higher-yielding assets. Raw materials account for 60 percent of Australia’s exports and benchmark interest rates are at 3.25 percent, compared with 0.1 percent in Japan.
The yen may also slide as Japan buys its own currency ahead of the financial year-end in March to aid businesses hurt by the yen’s 22 percent advance against the greenback over the past six months, the bank said.
“Given the yen long positioning, the impact on yen crosses may be quite significant,” BNP analysts said. A long position is a bet an asset will gain.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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