Yen Weakens as Australian Jobs Report Boosts Recovery Optimism

By Lukanyo Mnyanda

Dec. 10 (Bloomberg) -- The yen declined against higher- yielding currencies after a report showed companies in Australia added six times more jobs than economists estimated.

Japan’s currency snapped three days of gains against the so-called Aussie and fell for a second day against the kiwi after the statistics bureau in Sydney said the jobless rate fell to 5.7 percent and Reserve Bank of New Zealand Governor Alan Bollard said he expects to begin raising interest rates in the middle of next year. The dollar fell as investors cut bets that the Federal Reserve will increase interest rates next year. The Swiss franc was little changed after the central bank said it will halt bond purchases and left its main rate at a record low.

The Australian and New Zealand dollars “should strengthen across the board, particularly the Aussie, which is ahead in terms of the recovery cycle,” said Steve Barrow, head of Group of 10 foreign-exchange strategy in London at Standard Bank Plc. “The Aussie will keep getting stronger and the dollar is the carry currency to use there.”

The yen declined 1.3 percent to 80.88 per Australian dollar as of 9:43 a.m. in London and 1.8 percent to 64.30 per New Zealand dollar. Japan’s currency also weakened 0.4 percent to 88.26 per dollar. The euro bought 129.85 yen, from 129.39 yesterday.

Australia added 30,800 full-time jobs last month, today’s report showed. That pushed the number of new jobs created in the past three months to 99,500. The median estimate of 22 economists surveyed by Bloomberg was for 5,000 new jobs.

New Zealand Growth

New Zealand’s central bank increased its growth forecast for the first quarter of 2010 to 1.9 percent from 1.3 percent, according to a report published today. Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the nations’ assets.

The Aussie has gained 30 percent against the U.S. dollar this year, the best performer after the Brazilian real. The Reserve Bank of Australia increased interest rates three times since October. The kiwi is the fourth-best performer versus the U.S. currency.

Australia’s currency gained 0.9 percent to 91.64 U.S. cents, while the kiwi was 1.4 percent stronger at 72.86 cents.

“Australia’s data revived confidence in the bright story for the global economy,” said Tomohiro Nishida, a foreign- currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “Renewed risk sentiment will support higher-yielding assets and pressure funding currencies such as the yen and the dollar.”

Japanese Orders

The yen also declined as a report showed orders for Japanese machinery fell in October. A separate report showed producer prices dropped for an 11th month in November, fueling speculation deflation may undermine the economic recovery.

Futures on the Chicago Board of Trade showed a 41 percent chance yesterday that the Fed will raise its target rate for overnight bank loans by at least a quarter-percentage point by its June meeting. The odds were 51 percent a month ago. The central bank next meets to review borrowing costs on Dec. 16. The U.S. currency has fallen against all its most-actively traded peers since this year.

The franc traded at 1.5112 against the euro, from 1.5120 yesterday. It was at 1.0271 per dollar, from 1.0267.

The Swiss National Bank, led by Jean-Pierre Roth, held the three-month Libor target at 0.25 percent, as expected by all 16 economists in a Bloomberg News survey. It was last monetary policy decision before Roth is replaced by Vice-Chairman Philipp Hildebrand next month.

The euro gained against the yen as a report showed German wholesale prices increased last month, adding to evidence the recovery in Europe’s largest economy is taking hold. Prices rose 0.7 percent, compared with a 0.4 percent decline in October, the Federal Statistics Office in Wiesbaden said.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net