Australian and New Zealand Dollars dig in ahead of a Japanese rate hike
The Australian Dollar (AUD) trades near 111.00 against the Japanese Yen (JPY) and the New Zealand Dollar (NZD) near 89.50 on Thursday, both a little higher and both a long way below where they were in August. The Bank of Japan (BoJ) is expected to raise its rate to 1.25% on Friday, and that decision is supposed to be the thing that breaks the trade that borrows Yen cheaply to buy currencies paying more. The funds that publish their positions were out of it more than a week ago. What the trade pays after Friday The mechanics are plain. Borrow Yen at 1%, buy Australian Dollars earning 4.35% or New Zealand Dollars earning 2.75%, and keep the difference for as long as the exchange rate does not move against you. After Friday, Australian Dollars earn 3.10% more than the Yen costs to borrow and New Zealand Dollars earn 1.50% more, before anyone counts hedging or the spread. At 89.42, that 1.50% comes to about one and a third Yen a year. NZD/JPY has fallen more than six Yen since its August high near 95.00, which is more than four years of the rate difference gone inside a month. AUD/JPY earns about three and









