Dollar reaches record against yen, pound
The British pound has lost its dominance over the Australian dollar in the past four years, with the local unit setting a 28-year record against the British currency early on Friday as the UK economy struggles with poor growth and high levels of debt. It has also reached a 4 year high against the yen.
But the dollar has eased from its high of US110¢, set in July 2011, to trade at US102.68¢ on Friday as the US economy begins to recover.
The records against the pound and the yen signal a strengthening of the Australian dollar, which has benefited from a once-in-a-generation mining boom, and the faltering of traditionally strong economies.
CBA currency strategist Joseph Capurso said the trend against the pound could remain as weakness in the British economy persists. "You have to go back to the mid-'80s to get these sorts of levels," he said.
The dollar now buys 68.4 pence, a far cry from 2001 when it was buying only 33.5 pence.
Mr Capurso said the UK central bank was likely to inject more money into the economy, which would see the currency deflate further. But he said it was no surprise that it was weak against the Australian dollar.
"Their economy is weaker than ours, so their monetary policy is looser."
ANZ currency strategist Andrew Salter said Australia's wide interest-rate differential against other countries, as well as its "safe haven" status, were pushing its currency into new territory against those now-weakened economies.
"Both the pound and yen are very weak currencies," he said. "The yen is weak because of a change in political environment in Japan . . . whereas the pound is weak because of some pretty poor growth outcomes in the UK."
The yen has tumbled in the past months as Japanese Prime Minister Shinzo Abe, who took office in December, pushes for "bold monetary policy" to weaken the currency, stimulate the economy and defeat deflation.
Bank of Japan governor-designate Haruhiko Kuroda - nominated by Mr Abe - said this week he would "do whatever it takes" to end deflation.
The Australian dollar is now buying 97.41 yen, which is the highest since before the financial crisis in 2008.
Frequently Asked Questions about this Article…
The article reports the AUD hit a 28-year high against the British pound and a four-year high against the Japanese yen. Specifically, the Australian dollar was buying 68.4 pence and 97.41 yen at the time of the report.
According to the article, the AUD's strength is driven by a once-in-a-generation mining boom in Australia and the relative weakness of traditionally strong economies. Analysts also cite a wide interest-rate differential and the AUD's perceived safe-haven status as factors pushing the currency higher versus the pound and yen.
The article notes the AUD retreated from historic highs versus the US dollar and was trading at US102.68¢ on Friday, down from a high of US110¢ set in July 2011, as the US economy began to recover.
CBA currency strategist Joseph Capurso said the trend against the pound could persist because the UK economy is weak. He noted you have to go back to the mid-1980s to see similar levels and suggested the UK central bank might inject more money into the economy, which would further deflate the pound.
The article links the yen's tumble to Japan's political shift under Prime Minister Shinzo Abe, who pushed for 'bold monetary policy' to weaken the yen and fight deflation. Bank of Japan governor-designate Haruhiko Kuroda said he would 'do whatever it takes' to end deflation, contributing to the yen's weakness versus the AUD.
ANZ currency strategist Andrew Salter said Australia's wide interest-rate differential versus other countries, combined with the AUD's safe-haven status, was pushing the currency into new territory against weakened economies. He described both the pound and yen as 'very weak currencies.'
The article points out the AUD buying 68.4 pence is a marked change from 2001, when it was buying only 33.5 pence, underlining how much the exchange rate has shifted over recent decades.
The article's central message is that the Australian dollar has strengthened against some major currencies—particularly the pound and yen—due to Australia's mining boom and weaker economic conditions or looser monetary policy abroad, signaling pronounced currency-strength trends worth monitoring.
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