Australia’s dollar was near a four-month high before the U.S. releases jobs data amid speculation the Federal Reserve will delay reducing stimulus that has capped bond yields in the world’s largest economy.
The extra yield investors can get by holding the South Pacific nation’s two-year government notes instead of similar-maturity Treasuries was near the highest in six months, as investors pared bets that the Reserve Bank of Australia will lower its benchmark rate. A gauge of currency-market volatility held near a nine-month low, supporting carry trades, which profit from differences in borrowing costs.
Market participants “are skeptical that the RBA will ease further,” said Imre Speizer, an Auckland-based market strategist at Westpac Banking Corp. “As a result, they have been quick to push up interest rates in Australia, and that in turn has increased the carry attractiveness of the Aussie dollar in the same way that the kiwi is attractive.”
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